Strata vs Detached Home Insurance
Is Home Insurance More Costly for Strata Owners in BC?
If you are a resident in BC and own a property, you may know a thing or two about home insurance. Home insurance has been a hot topic over the past couple of years and a lot of the buzz about it has centralized around strata deductibles. This article can help those who currently own a strata property such as a condo or townhouse, those who are looking to purchase a property shortly or individuals who are looking at purchasing a detached home. It may also provide some insight into home insurance for renters – although you may not be paying directly for home insurance or towards your monthly strata fees, if a claim is ever made and you are the occupant of the property, you may want to understand more about how strata insurance plays apart of the overall insurance coverage for the property.
Strata Insurance Policies
Insurance policies are designed to protect the purchaser from unexpected losses. Strata insurance policies are no different; they are designed to protect owners against liability for property damage and bodily injury, and in British Columbia all stratas must obtain and maintain that coverage. While insurance policies have many features, two of the critical ones are the policy premium (how much you pay up front) and the policy deductibles (how much you pay when making a claim, which often varies depending on the nature of the loss).
As many of you know, in recent years, the strata insurance market has seen premiums and deductibles skyrocket, and according to the BCFSA, that’s unlikely to change anytime soon. For strata owners, the hike in premiums impacts you directly through rising maintenance fees, but what about the impact of the change in deductibles?
The higher deductibles will affect you in two ways:
- Your strata will no longer be able to make claims that would have been covered under your previous policy deductibles.
For example, if your strata previously had an insurance policy with a $20,000 deductible and experienced a loss of $70,000 due to a water leak, you used to pay the $20,000 deductible and the insurer would cover the balance. Now, assuming your deductible has risen to $75,000, all $70,000 of the water loss would need to be paid by your strata.
This means that when something does go wrong, you are less likely to be able to rely on your insurance to help.
- You will personally pay more for strata insurance for your condo or townhouse.
On top of the higher premiums you pay via your maintenance fees, your own personal insurance policy costs will rise. This is down to the fact that in addition to covering your personal property and any improvements to your unit – used to be based on covering the strata’s previous deductible if the loss originated in your unit. This means that your insurer’s exposure was your loss plus the strata’s deductible. Now, your strata insurance policy should cover the new strata deductible, which for purposes of example may now be $75,000. With some strata deductibles rising to $250,000 or more, some owners can’t secure enough coverage at any cost. The result of this is that your own policy premiums are going to rise (and it’s likely your personal deductibles will rise too).
The bottom line for owners of strata properties is that until the market conditions change, they’ll be paying more – much more – for both their strata’s insurance and their own.
So how does this compare to home insurance on detached homes?
Overall, home insurance is rising and this is down to the rise in claims for a range of incidents in recent years – especially fires and floods in BC. Additionally, with the surging cost of living insurance costs are also rising. So, insurance will rise even if you are in a detached home.
For a detached home, you are covering the cost of home insurance for the entire property. In a strata arrangement, the strata is buying insurance for the entire strata to cover the cost of repairs to the common “envelope” as well as any liability claims. This is divided between the strata owners and the cost is added to the monthly fees strata owners pay to be part of that strata. As well, each homeowner is responsible to obtain personal home insurance for their property.
Home Insurance and Purchasing a Property in BC
Should the rising cost of strata deductibles and home insurance in BC play a part in the decision of whether to buy a detached or strata property? The answer to this question is likely that it would not. In the times we currently live in, the primary determining driver of the type of property purchased is affordability. Home insurance is an element to consider and can be costly – but it can be an ongoing factor to consider for both detached and strata properties.
When purchasing a property, it is most important to find a property that meets your needs and is a property that you will be able to afford even if costs rise. As we are seeing now with the high inflationary times and the rising cost of living, many people are in a position where they are unable to meet their basic needs. By ensuring you have a comfortable emergency fund in place and room to bear higher expenses including insurance, you will be in a better position to manage a sudden rise in household costs such as home insurance.
At Leaders Insurance, our brokers are here to assist you with finding ways to manage your home insurance and find the best policy and rates for your needs. We take the time to understand your needs and can help you as you navigate the everchanging property market when it comes to home insurance. We look forward to assisting you with all of your insurance goals and requirements. Contact Us today.
All About Earthquake Insurance
All About Earthquake Insurance
Did you know that every year there are roughly 4,000 recorded earthquakes in Canada? Many of us wouldn’t have thought that a country like Canada would be so prone to these natural disasters but experts in British Columbia (BC) warn that in the next 50 years, there is a 30% chance of a significant earthquake in the province. As a result of these global disasters, the Insurance Bureau of Canada (IBC) commissioned an Earthquake study. One of the results of the study estimated that the overall cost, following a 9.0-magnitude earthquake in BC was nearly $75 billion. The full report also quantified the number of damage Canadians could expect if faced with a significant earthquake. It demonstrated that a major earthquake would have a significant economic impact regionally as well as a domino effect on the entire Canadian economy. As a homeowner, do you know if you are protected if an earthquake strikes?
In General
Now knowing these statistics, this may be the perfect time to review your insurance policy to see if it includes earthquake insurance. It is interesting to note that earthquake coverage typically does not form part of most standard home insurance policies. It can however be purchased separately, assuming your property is eligible for the coverage. It will carry with it an additional premium amount and is always subject to a higher (separate) deductible than coverage for other perils included in your policy.
In recent years, we’ve seen the cost of earthquake insurance rise globally and here in BC. This is partly due to the rise in natural disasters, the impact from climate change and the general spike in the cost of living.
Rising costs are something we all need to consider but getting the proper coverage if an earthquake strikes, should be an important decision as a homeowner. It is important to do your research to understand if your property is at risk, based on the location of your property and the infrastructure it is built on.
As we have seen in similar disasters in other parts of the world, earthquakes can leave entire cities paralyzed and many homes destroyed. In the next few sections, we will take a closer look at earthquake coverage, how much it roughly costs to purchase, and whether it is worth purchasing for your home or condo.
What is Earthquake Insurance?
In its simplest description, Earthquake insurance covers the loss or damage caused to a property as well as its contents, because of the shaking of the earth. In most policies, if the shaking of the earth results in a fire, only the resulting loss or damage from the fire would be covered under an ordinary home insurance policy. However, if your home is damaged because of the earth-shaking, not a fire, your standard home insurance policy would not cover the resulting damage unless you have purchased the earthquake coverage add-on.
It is true that earthquakes do not occur as frequently as other natural disasters. While that may be true, earthquakes can cause disastrous damage to homes, possessions, and other buildings. They can happen at any time and can leave people completely stranded, without any of their possessions or even a place to live. Having earthquake insurance provides you with peace of mind knowing that should a major quake hit the Lower Mainland, your home and your belongings are covered.
Cost of Earthquake Insurance
Over the years, the cost of earthquake coverage has increased substantially. Depending on the area of BC that you live in, the additional premium directly attributable to the earthquake can make up as much as 25-35% of your overall premium. Multiply that amount by the number of years you own your home or condo for, and you are paying a significant amount of money for something that may never happen in your lifetime. If the earthquake coverage component costs $300 a year to have and one lives in their home or condo for 40 years, that’s $12,000.
Purchasing any type of insurance requires all of us to look at the costs and benefits. While this cost may seem like a lot – especially at the moment with costs of living rising – if we didn’t have earthquake coverage and an earthquake hit, that could mean a total loss of a home. If we were to experience a disastrous earthquake in our lifetime, that $12,000 spent would be worth every penny and provide you with financial certainty during the most challenging time of your life. And, given that we do live in a part of the world that is prone to earthquakes—and experts telling us we’re overdue for ‘a big one’, it better to be safe than sorry and make an Earthquake Coverage part of your Residential Insurance policy.
Also as part of many earthquake policies, in certain circumstances, homeowners who are unable to return to their homes as a result of insurable damage may be entitled to additional living expenses. Earthquake coverage is also available for your place of business. In the event earthquake damage impedes your business operation, business interruption insurance can also be purchased.
At Leaders Insurance, our brokers are here to assist you with finding ways to manage your home insurance and find the best policy and rates for your needs. This includes investigating the costs and coverage for earthquake insurance. We look forward to continuing to support you in 2023 with all of your insurance goals. Contact Us today.