Understanding Your Strata's Insurance
Learn the ins and outs of your building's strata insurance policy and how their deductible limits can impact your life.
Your strata's responsibility.
Responsibility for buying and maintaining an insurance policy covering damage to the building foundation, shell, parkade, common areas, and other liabilities lies with the building's Strata Association. The policy may also include additional protections, such as coverage for mechanical breakdown of your HVAC systems, and errors and omissions (E&O) during management. The cost of the strata policy is shared by all unit owners.
Strata deductibles are rising.
The BC Financial Services Authority (BCFSA) reported a substantial rise of approximately 40% in strata insurance premiums, coupled with triple-digit increases in deductibles across the province in their interim report released on June 16, 2023. These increases are significantly impacting British Columbia, where nearly one in three residents live in a strata property.
Several factors contribute to the escalating strata building insurance premiums, as outlined by the insurance industry. These factors include a surge in the number of claims, an increase in the cost of repairs and rebuilding, and a rising number of strata developments. Many strata buildings date back to the 1970s and ’80s and strata owners may be reluctant to undertake major system upgrades until problems occur.
B.C. government is ushering in changes
Due to a combination of complex factors, the cost of strata insurance has risen, prompting the Province to take action to address the issue.
The BC Financial Services Authority (BCSFA) was directed by the Province to investigate the strata insurance market in British Columbia. The findings of the BCFSA report will play a crucial role in shaping the government's response to the challenges posed by strata insurance.
For additional information, refer to the BC Financial Services Authority Report.
Decoding A Strata Policy
These primary coverages are found on most strata policies. For a complete list, see our Help page.
Strata deductibles work as a key component of a strata corporation's insurance policy, defining the amount the strata must pay out-of-pocket before insurance coverage is activated for a claim. Understanding the mechanics of these deductibles is crucial for both the strata corporation and individual unit owners. Here's a breakdown:
- Definition of a Strata Deductible:
A deductible is the amount that the strata corporation must pay before the insurance company covers the remaining costs of a claim.
This is similar to a deductible in a personal insurance policy, but it applies to the common property and assets managed by the strata.
- Types of Deductibles:
Deductibles can vary based on the type of claim – for instance, water damage, theft, fire, earthquake, etc.
Certain claims, like those for earthquake or water damage, might have significantly higher deductibles due to the higher risk and potential cost of these incidents.
- Impact on Strata Corporation:
The strata corporation is responsible for the deductible amount in the event of a claim involving common property or shared assets.
If the cost of the damage is less than the deductible, the strata corporation typically covers the entire amount.
- Impact on Individual Unit Owners:
In cases where an incident originates from an individual unit (e.g., water damage from a burst pipe in a unit), the strata may seek to recover the deductible amount from the unit owner deemed responsible.
This highlights the importance of unit owners' personal insurance, like homeowner’s insurance, which can cover the strata’s deductible if the owner is held responsible.
- Large Deductibles and Special Assessments:
For large claims with high deductibles, the strata corporation might need to impose a special assessment if the deductible exceeds the strata's contingency reserve fund.
This means individual unit owners may need to contribute to cover the deductible.
- Choosing Deductible Levels:
Strata corporations decide on their deductible levels when selecting their insurance policy.
Opting for a higher deductible usually results in lower insurance premiums, but also increases the financial burden on the strata in the event of a claim.
- Importance for Unit Owners:
Unit owners should be aware of the strata's deductibles and ensure their personal insurance policies can cover these deductibles where applicable.
In summary, strata deductibles represent a crucial financial consideration for both the strata corporation and the individual unit owners. It's important that all parties understand these deductibles and prepare accordingly, both in terms of strata policy selection and personal insurance coverage.
This term implies comprehensive coverage for various types of property that is owned commonly by the strata. It is a broad categorization, encompassing a wide range of property items that the strata might have. Instead of listing specific items or types of property, the policy covers 'property of every description,' which provides a wider safety net against potential losses.
This phrase details how an insurance policy will provide coverage in the event of a claim. 'Per occurrence' indicates that the coverage extends to losses that resulting from a single event, incident, or occurrence. Typically, there is a maximum limit set by the insurance company for each occurrence as well as a total aggregate limit, which represents the cumulative sum of multiple claims.
Business Interruption insurance, when included in a strata (condominium) building policy, is specifically designed to cover the loss of income that a strata corporation might experience following a disaster. This form of insurance is particularly important for strata buildings that generate income, such as those with commercial units or leased spaces. In the event of a covered incident that disrupts the normal operation of the strata building, Business Interruption insurance helps offset the financial impact by covering the income lost during the period of interruption.
Earthquake and Flood (Overland Water) coverages in a strata building insurance policy play a crucial role in providing financial protection against damage resulting from specific natural disasters. Here's a breakdown of each coverage:
Earthquake Coverage: The purpose of this coverage is to protect against damage caused by earthquakes, encompassing potential damage to the building structure, common areas, and, depending on policy specifics, individual units.
Deductibles: Earthquake insurance typically involves high deductibles, reflecting the substantial potential cost of earthquake damage. These deductibles are often calculated as a percentage of the building's value or the insured amount.
Exclusions: It's important to understand what the policy does not cover, such as land subsidence or damages occurring after a certain period following the earthquake.
Flood (Overland Water) Coverage: The purpose of this coverage is to protect against damage resulting from the overflow of inland or tidal waters, rapid accumulation or runoff of surface waters (like rainwater or melting snow), and waterborne ice.
Distinguishing from Other Water Damage: This coverage is distinct from other water-related coverages, such as sewer backup or water damage from plumbing issues. Overland flood coverage specifically addresses water entering the property from the outside.
Deductibles and Limits: Similar to earthquake coverage, flood insurance may involve higher deductibles and limits on coverage, varying based on policy specifics and the location's risk profile. Both types of coverage are particularly relevant for strata corporations in areas prone to these natural disasters. They serve as a financial safety net, ensuring that the strata has the resources to repair and rebuild after catastrophic events. This, in turn, protects the investments of the unit owners and preserves the functionality of the building.
General Liability coverage in a strata building policy is an essential component designed to protect the strata corporation against various liabilities. This coverage typically includes Bodily Injury, Personal Injury, and Property Damage Liability. Here's a breakdown of each:
1. Bodily Injury Liability: The purpose of this coverage is to protect the strata corporation if someone is physically injured on the strata property. It can include coverage for medical expenses, legal fees, and damages if the strata is deemed legally responsible for the injury. Injuries may result from slips and falls on common property, accidents involving strata maintenance equipment, or other hazards on the premises.
2. Personal Injury Liability: Personal Injury coverage extends beyond physical harm, covering non-physical injuries. This coverage protects against issues such as libel, slander, false arrest, wrongful eviction, and invasion of privacy. This coverage is particularly relevant for strata councils or boards that may face allegations of such actions in the course of managing the strata property.
3. Property Damage Liability: This coverage affords protection if the strata corporation is legally responsible for damaging someone else's property. This doesn’t cover damage to the property owned by the strata itself.
This could include scenarios where strata operations or negligence result in damage to a visitor's vehicle, or where a common property element causes damage to an adjacent property.
General Liability coverage serves as a crucial layer of protection, helping the strata corporation navigate legal and financial challenges arising from these specific liabilities.
Strata Corporation Directors & Officers (D&O) Liability insurance is a specialized coverage designed to protect individual directors and officers of a strata corporation against personal losses resulting from legal actions brought against them for their actions or decisions made in their official capacities. Here's an overview of what this insurance typically covers:
1. Legal Defense Costs: The primary benefit is covering the cost of defending against a lawsuit alleging wrongful acts in the management of the strata. This includes lawyer fees, court costs, and associated legal defense expenses.
2. Settlements and Damages: If a lawsuit results in a settlement or the directors and officers are found liable for damages, this insurance can cover those costs, up to the policy limits.
3. Wrongful Acts: The term 'wrongful acts' encompasses a range of actions such as breach of fiduciary duty, mismanagement of funds, failure to maintain the common property, decisions beyond their authority, and violations of strata bylaws or regulations.
4. Protection for Individuals: D&O Liability insurance is crucial as directors and officers can be held personally liable for their actions, putting their personal assets at risk in a lawsuit. This insurance helps mitigate that personal financial risk.
5. Benefit to the Strata Corporation: While primarily protecting individuals, it also benefits the strata corporation by encouraging qualified individuals to serve as directors and officers without fear of personal financial loss.
6. Exclusions and Limitations: Like any insurance policy, D&O Liability insurance has exclusions and limitations. It typically does not cover fraudulent, criminal acts, or intentional non-compliant behavior.
This insurance is critical for strata corporations as directors and officers often make decisions on behalf of the entire strata, and these decisions can sometimes lead to legal challenges. D&O Liability insurance provides a level of security and peace of mind for those serving in these voluntary, yet crucial roles within the strata corporation.
Broad Form Money and Securities coverage in a strata insurance policy is designed to protect against the loss of money and securities due to various risks like theft, robbery, or embezzlement. This type of coverage is particularly important for strata corporations that handle cash or securities as part of their operations.
Pollution Liability coverage in a strata insurance policy is designed to protect the strata corporation from the financial consequences of pollution incidents that occur on or emanate from the strata property. This type of coverage is increasingly important due to the strict environmental laws and potential for significant cleanup costs and legal liabilities associated with pollution. Some real world claims would be:
- Asbestos Discovery During Renovations
- Pesticide Runoff from Landscaping Activities
- Chemical Spill in a Shared Facility
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Discover how stratadeductible.com can help you protect your finances by filling the gap between your current insurance coverage and the high deductibles imposed by strata corporations.
Buy Online: Excess Water Damage for BC Condos
It's easy! stratadeductible.com is simple and convenient. Follow these steps to get a quote for the excess coverage you need to fill your coverage gap.
Step 1: Enter your current strata protection limit. eg: $100K
What do you have? Enter Your Homeowner's Policy limit for "Strata deductible assessment". Learn more.
Step 2: Enter the strata's water damage deductible limit: eg $500K
What do you need? Enter Your Strata Insurance Deductible Amount for Water Damage under "water damage". Learn more
Know your gap. If you have one, our policy will provide excess insurance, filling the void and protecting you from steep strata deductible charges for water damage you may unintentionally cause. Rest easy, knowing you're covered.