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:

1. 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.

2. 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.

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.

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.