What is Strata Deductible Insurance
Strata deductible insurance helps pay your portion of the strata corporation's master building policy following a catastrophic event. These deductibles can be quite high, and in the event of any damage you cause directly, (like a major water leak), the entire deductible cost could be charged to you, and only you, the unit owner. You could face significant out-of-pocket expenses to cover the deductible in high-deductible strata buildings. In a worse case scenario, you forfeit ownership of the unit if you are unable to pay.
Is Strata Deductible Insurance New?
Strata deductible insurance is a relatively new specific type of insurance policy designed for individuals who own units in a strata property that has seen large deductible increases.
In the past, with many insurance options available for consumers, insurers would have reasonable deductibles when damage to the building occurred. As a stratum, the reserve funds would typically pay for the deductible should a unit get flooded and cause damage. However, in recent years, we have seen a contraction of available options or a ‘hardening of the insurance markets’ originating from Lloyds of London. Thus, with reduced competition, insurers can now charge exorbitant deductibles, meaning only catastrophic losses will be covered. Strata owners are now on the hook for damage if it is less than the deductible.
Are Strata Deductibles Increased?
We’ve heard of one building in Vancouver that has multiple water-related damages, with a $1,000,000 deductible for the next claim. The strata association has had to react to these insurance changes by doing the only logical thing. Now, the unit owner who caused the loss must pay the entire deductible.
Strata deductible Insurance is a service offered through the website stratadeductible.com and solves this dilemma with an easy-to-buy XS water damage insurance policy online. You can pay with a credit card and even offer promotional coupons, bringing you peace of mind so you can relax.
Strata deductible insurance is a specific type of insurance policy that does not directly insurance contents or your liabilities. Because it is an XS policy, it sits on top of your existing unit owner’s policy and will act to pay your deductibles only following a claim that is being paid by your insurer. Where they stop paying for the strata’s deductible cost, we take over and fill in the uninsured gap.
For example, if your current policy has a $35,000 ‘Strata Deductible Coverage’ but your Strata’s policy shows $150,000 Water Damage Deductible, you would have to pay the difference or $115,000!
Know your strata deductibles
If you like in a strata owner building, chances are the strata association has purchased a master insurance policy. This policy will insure the building envelope, common areas, mechanicals, and other features like errors and omissions, non-owned auto liability, general liability so on and so forth.
Whenever an accident or damage occurs, the insurance company will assess the damage and then apply a deductible. Think of a deductible as you paying the first dollars of loss, and then once you reach the deductible amount, the insurance company pays for the rest of the damage but only up to the maximum limit. For example, if you have a bike stolen, and it’s worth $800, but your insurance deductible is $1,000, it is not worth filing a claim. However, if the bike is worth $10,000 you would get $9,000 towards paying for its replacement.
Deductibles are designed to cut down on fraud and minor accidents, as it can be costly to administer a claim even from the insurers perspective, even if the damage is slight.
Why the change in strata deductibles?
In recent years, we have seen a reduction in insurance capacity in BC due to economic and disaster-related catastrophes such as wildfire, hurricanes and tornadoes. Worldwide, the insurance markets are in a ‘hard’ state, meaning capacity is reduced, and underwriters are unable to provide the protection that consumers need.
In reaction, insurance deductibles are now quite high. We are seeing $500,000 as becoming the new normal from major brokers BFL, HUB and Acera. Obviously, unit owners in a strata unit will not be too happy if asked to pay their portion of the $500,000 damage deductible,
Without strata deductible insurance, individual owners could face significant out-of-pocket expenses to cover their share of this deductible.
Available cover from Stratadeductible.com
Why should I get this?
Purchasing strata deductible insurance is important for several reasons, particularly for those owning units in condominiums or strata properties:
- Financial Protection: Strata deductible insurance protects individual unit owners from potentially high out-of-pocket expenses. If a claim is made on the strata corporation's master policy, the deductible can be substantial. This insurance covers the owner's share of that deductible, preventing significant personal financial burden.
- Shared Liability in Strata Living: In a strata property, individual owners are collectively responsible for damages to common areas or the overall building structure. Strata deductible insurance ensures that owners are not overly burdened financially when these shared liabilities arise.
- Gap Coverage: Standard homeowners' insurance policies often don't cover the gaps presented by strata living. Strata deductible insurance fills this gap, ensuring that owners are not left vulnerable to specific risks associated with shared property ownership.
- Peace of Mind: Knowing that they are protected against large deductibles in the event of a major claim provides condo owners with peace of mind. This is especially important in areas with higher risks of property damage due to natural disasters or other factors.
- Compliance with Strata Bylaws: Some strata corporations may require owners to have this insurance as part of their bylaws, to ensure that all members of the community are adequately protected and to maintain the financial stability of the strata corporation.
In essence, strata deductible insurance is a crucial component of risk management for anyone involved in strata living, offering a safety net against the unique financial risks posed by shared property ownership.
Next: What are the key benefits of having strata deductible insurance?
You might be interested in: What is strata water damage deductible insurance and how does it work?
From: Who pays strata insurance deductible insurance?
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Who pays strata insurance deductible?
In the case where the strata's water damage deductibles are very high, the strata will typically impose a bylaw requiring the 'at fault' unit owner pay the entire insurance deductible. Since sharing the cost of the deductible could be significant, most stratas will deem it unfair to punish innocent owners, the cost is passed onto the owner who causes the loss. It is important for every owner living in a strata to fully understand the implications of causing an insurance claim requiring the building's policy to act.
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Every condo owner should be aware that while the building’s master insurance policy, typically managed by