ARE YOU AFFECTED BY THE INCREASE IN STRATA INSURANCE RATES?

Homeowners in B.C., particularly condo and townhouse owners, are now bracing themselves to deal with the hike in insurance premiums for strata buildings, anywhere from 50 to 500 percent. Over and above that, the deductibles are also going up anywhere from $10,000 or $20,000 to as high as $150,000 or $500,000.

Why is this happening?

Strata Property Act requires that all strata corporations carry insurance for the value of the building. And as property values have skyrocketed in the recent years, it naturally follows that the insured amount will have to go up as well. Some insurers are reviewing their underwriting criteria and how much risk they are willing to take. There are about 65 insurers in B.C. and not all of them offer insurance to B.C. strata corporations. There are also fewer companies offering strata insurance in B.C. than in other provinces, thus reducing competition.

Added to that, B.C. has also had its share of wildfires and flooding, not to mention the global impact of catastrophic events, which by trickle-down effect, ultimately affects BC residents since our insurers have to re-insure the coverage from global insurers.

According to the Insurance Bureau of Canada, insurers were paying about $500 million annually in the whole of Canada in the past. This amount has drastically gone up to around $2 Billion in 2018.

What is the impact of the increase of insurance premium on homeowners?

If you’re a condo or townhouse owner, you many want to look into what kind of increase will be coming your way if you haven’t done so as of yet. Homeowners will see an increase of about 20% or more in their monthly strata fees to cover the hike in insurance premiums. There may be some buildings, which may  require a special levy to homeowners in order to augment their contingency fund to cover deductible in case of a claim.

Aside from insurance premiums going up, deductibles on insurance claims are also expected to increase. This deductible will definitely have a huge impact to the financial reserves of the strata companies as well as to the cost of individual condo owners. Individual condo and townhouse owners may have to contend with shouldering the full load of an insurance claim. For example, a condo owner may get distracted resulting in an overflow of water, damaging his unit and several units below with an expected repair cost of $250,000. If the strata has a high deductible claim, say $500,000, the strata may decide not to file a claim through the building’s insurance, therefore either leaving the owner responsible or use the building’s owner-contributed contingency fund for the damage.

For those looking to get into the real estate market, you will have to do your due diligence and review the overall condition of the property – this includes the physical and the financial structures which includes the insurance policy of the strata corporation.

If you have any questions about pre-approval, renewal, refinance, how to get out of debt faster, or a confidential and complimentary review of your overall financial situation, please don’t hesitate to contact me.