Why is condo insurance going up?

Why are condo premiums are on the rise

What’s fuelling the hike in prices? A perfect storm, according to the December 2020 report from B.C. Financial Services Authority (BCFSA)—and one major culprit is the weather. According to the Insurance Bureau of Canada (IBC), severe weather caused $2.4 billion in insured damage across the country during 2020. The major events included the Fort McMurray floods, Calgary hail storms and wild wind storms in Ontario and Quebec. (And surely, today’s West coast fires will impact future premiums, too).  

Watch: What is Condo Insurance?

The BCFSA also lists the rising cost and value of new condo construction as a factor. Materials and fixtures are currently priced at a premium and those costs raise the final sticker price of a new build, requiring costlier insurance to match the property’s value.

The same report cites that condominiums are considered high-risk are driving prices as well. How is that risk determined? The report states that “a building’s risk profile depends on multiple factors, including claims history, age, type of construction, maintenance, proximity to fire hydrants, and potentially catastrophic loss exposure.”

Water damage is yet another factor. And the older a building gets, the more likely water damage becomes an issue. “The building envelope and plumbing materials may start to fail,” says Stefan Tirschler, a product and underwriting manager at Square One Insurances Services. “A 10-year-old condo building has 10-year-old appliances that may wear out…and there’s not just one washing machine, there’s probably 500 of them.” The potential damage from a number of older appliances can lead to more claims in a given building. As more condos age, there’s a higher risk of collective losses, which the insurance business needs enough cash flow to pay out.

The result? Charging higher premiums. 

And it’s not just your condo insurance policy that’s getting more expensive—your home owner association (HOA) building insurance is at risk of price hikes too. (Learn more about how condo insurance works.) As a result, Tirschler says unit owners are vulnerable to financial losses passed on by condo corporations who are trying to keep their premiums low.

For example, condo corporations are starting to take on larger deductibles on a building’s insurance policy to save money on lower premiums. When a claim is made by the building, and its reserve fund doesn’t have enough to cover the higher deductible, that cost can be passed down to each condo owner. 

A number of condo corporations are also revising building bylaws “to ensure they can actually assess an individual unit [to see if] an entire loss originated in their unit,” adds Tirschler. “When that happens, that loss hits the unit owner and their individual policy with a big claim that maybe wouldn’t have happened in the past.” 

As more condo owners experience this kind of sting on their claims history, there are more losses for the insurance industry to pay and overtime. The trickle-down effect—you guessed it—is higher overall premiums.

How much is condo insurance?

The price of home insurance can range from $250 to over $1,000 per year. However, it depends on a number of different factors, including the number of claims in your building, your own insurance history and what type of coverage you opt for.

How to save on condo insurance premiums

• Ask about savings and discounts, such as bundling your condo home insurance with auto insurance. Tirschler says improvements such as adding an alarm system can help lower rates too. Ask an insurance provider about what kind of upgrades will win you more savings.
• A low-maintenance condo still requires some T.L.C., especially because damages can spill beyond your suite. If an appliance, shower or faucet is leaking, get it fixed before it turns into a flood. Your policy won’t cover that because it was preventable, and it will leave you with an unexpected bill to pay. “If you do want to make improvements, make sure a qualified tradesperson does it. That extra quarter turn can make the difference between a dry bathroom and a flooded one,” adds Tirschler. Ditto for any electrical or other maintenance that could affect your neighbour or the entire building: Hire a pro.
• Only pay for what you need by asking a broker or provider to create a policy that matches the value of your property, its contents, upgrades and your building’s risk of damage or loss. And check-up on your policy once a year to see if you really need all the bells and whistles that you’re paying for. (For example, if you passed on your great-grandmother’s sapphire ring to your sibling, you won’t need the extra coverage for it anymore).
• Take advantage of online resources and comparison shop. There’s plenty of info that will help you get a head start on finding a premium that will fit your budget. 

  For more tips on how to save on condo (or any type of home insurance) read more about it here.

More on home insurance:

• How condo insurance works
• What is home insurance? Everything you need to know about protecting your home in Canada
• How climate change is affecting your home insurance
• How to compare home insurance before you buy