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Apartment house owners face rising insurance coverage payments for injury to frequent areas

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Many condominium buildings are elevating their deductibles, which helps decrease the annual value of insurance coverage, however the price of a better deductible is then handed to condominium house owners when a constructing submits a declare for damages.DARRYL DYCK/The Canadian Press

Apartment unit house owners throughout Canada may very well be on the hook to pay for costly damages to constructing frequent areas as condominium boards attempt to restrict the price of surging insurance coverage premiums by rising the deductibles on insurance policies – in some instances elevating them to $150,000 from $10,000 presently.

Business consultants say partial prices for injury to frequent areas attributable to a condominium proprietor’s unit, reminiscent of a leaking washer flooding a hallway, are usually handed on by the condominium company to the unit holder accountable, who’s required to pay the deductible – the uninsured portion of the damages.

“This can be a disaster ready to occur as there was little or no communication from condominium boards after they enhance their deductibles, leaving many condominium house owners prone to having to pay tens of 1000’s of {dollars} out of pocket,” mentioned Sabine Ghali, director of Buttonwood Property Administration Inc. in Toronto.

Apartment companies – also referred to as strata companies in some provinces – are legally required to purchase insurance coverage insurance policies to cowl damages to frequent areas of their buildings. Like insurance coverage insurance policies for people, these contracts have a deductible, which isn’t coated and have to be paid out of pocket by the condominium company if it makes a declare.

No simple options to complicated downside of excessive condominium insurance coverage premiums, B.C. report says

Many condominium companies are run by of a bunch of particular person condominium house owners, who’re additionally in command of making an attempt to maintain month-to-month condominium charges from rising. However that has develop into more and more tough as insurers have sharply elevated premiums – typically doubling them or extra – as claims prices rise.

To mitigate increased premiums, many buildings are opting to lift their deductibles, which helps decrease the annual value of insurance coverage. The price of a increased deductible is then handed onto condominium house owners when a constructing submits a declare for damages – a follow generally known as a chargeback.

For instance, if a kitchen hearth in a single condominium unit damages an elevator, the unit’s proprietor will likely be accountable for paying the constructing’s full deductible.

Most unit house owners have insurance coverage insurance policies that cowl deductibles charged again by condominium companies, however just for the “extra conventional” most quantity of $10,000, mentioned Ms. Ghali, who manages condominium buildings all through the Better Toronto Space.

The variety of buildings which have elevated their deductible has been accelerating over the previous 12 months, she mentioned, with many condominium boards solely speaking the modifications in annual updates which are often mailed out in newsletters.

Ms. Ghali mentioned the rise in deductible limits shouldn’t be communicated in a format that may “get misplaced within the shuffle.” Apartment boards have to do a greater job of training condominium house owners on constructing and unit insurance coverage insurance policies – particularly on how a lot chargeback protection unit house owners presently have and which insurance coverage corporations will cowl a brand new increased quantity.

“Some insurance coverage corporations have a cap on what they’ll cowl for deductibles, which means condominium house owners might be left scrambling to discover a new coverage altogether,” Ms. Ghali mentioned.

The latest spike in deductibles is as a result of rising value of insurance coverage, says Rob de Pruis, director of client and trade relations on the Insurance coverage Bureau of Canada, a nationwide trade group with 74 insurance coverage firm members.

“The trade has seen a rise in claims prices in every kind of various areas – not simply in property claims but in addition in legal responsibility claims,” Mr. de Pruis mentioned. “The extreme climate we have now seen in British Columbia, together with macroeconomic elements reminiscent of low rates of interest, is pushing up the price of insurance coverage premiums.”

“And, much like your automotive insurance coverage, a technique to assist decrease the insurance coverage premium is to extend your deductible.”

Mr. de Pruis mentioned shifting the rising value of premiums from a company onto a person unit holder is just not addressing the basis reason behind the value will increase, which is the rising value of claims.

In the summertime of 2020, the IBC arrange a nationwide business insurance coverage job pressure to carry roundtable conferences to handle a number of client issues in regards to the affordability of economic insurance coverage, together with the strata business insurance coverage market, and notably in British Columbia and Alberta.

The IBC revealed numerous suggestions to the trade, together with a proposal to manage constructing upkeep and make it extra environment friendly (to cut back the variety of claims), educating condominium companies on the way to enhance their danger profile and thereby qualify for higher premiums, and placing a cap on the quantity a condominium company can gather from unit house owners on its deductible.

Alberta lately made modifications to permit condominium companies to solely declare as much as a most of $50,000 of a deductible from a unit holder.

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