Strata insurance, also called body corporate insurance, covers common contents and property under the management of a strata title or body corporate entity. Where owners of strata units typically share the premium costs of strata insurance as part of their strata fees and liabilities. It is mandatory and must also provide public liability covering people that may be injured on common property.
But what if the strata insurance increases? Do you ever wonder how it can affect you?
Condo and townhouse owners in B.C. are very confused in the wake of recent revelations insurance rates for strata buildings in B.C., which means by seeing a sudden spike of anywhere from 50 to 300%.
Jose Antonio Maestre, 49-year-old, from Vancouver is one of them. He’s been scrambling down to get homeowners insurance after his building’s deductible went up by 400% – from $30,000 to $150,000. This kind of amount will not be covered by every insurer, leaving him unprotected in case of damage.
“I would probably have to sell my apartment, just to cover the deductible,” said Maestre. He’s one of the many homeowners facing like this massive hike in insurance costs.
The Condominium Home Owners Association of B.C. is also facing this kind of crisis where it says that close to 300 strata corporations have seen significant insurance rates increases.
How are owners affected?
The increase in strata insurance premium can affect both condo and townhouse owners in several ways.
A building’s insurance is a common expense that’s approved annually and paid through the owner’s monthly strata fees. Because of this, some owners could see hikes on the order of 20 percent or more. Many owners have already seen a hike in their strata fees, but the effect is more than that.
Because of this, the owners will also likely see an increase in their homeowner’s insurance rates.
For example, if a building’s deductible goes up, the owner has to be covered for the new, higher amount. That will translate into higher monthly premiums for owners.
And because of higher deductibles, many strata corporations will try to avoid filing a claim through the building’s insurance, which means owners could be on the hook for the damage, either through the building’s owner-contributed contingency fund or through special levies on individual lots.
As you are aware, Vancouver has been significantly impacted and it’s becoming a crisis. Homeowners are unable to renew their coverage because the building is too high risk. Strata companies and condo owners are petitioning for Government Intervention.
Following are the different factors that will determine whether your insurance will be refused and what percentage of an increase in premiums/deductibles will be the results:
1) Fewer insurance companies are willing to share the risk of insuring high-rise buildings.
2) The number of claims has increased.
3) Whether or not the building has been keeping up with the depreciation report scheduled/suggested maintenance.
4)The cost of rebuilding has increased.
5) Global frequency and severity of fires, floods, severe storms, and earthquakes and catastrophic losses from weather related incidents are a leading reason for current premium increase.