What you need to know about condo corporation insurance
If you think that serving on the board of directors of your condo corporation is simply about managing the budget and keeping an eye on building maintenance, think again. As a volunteer member of your condo board, you’ll also have some important insurance decisions to make—even if you’re just volunteering and don’t have any relevant experience. Your choices can have a big impact on all the other co-owners in your building. And there are so many questions to think about. What does condominium corporation insurance cover? Which insurance options do you need to consider? How do you know what your responsibilities are for the condo corporation?
Keep reading to find out more about what a condo corporation is responsible for, the main risks it may be exposed to and the insurance coverage that can help mitigate those risks.
What is a condominium corporation and why does it need business insurance?
A condominium corporation—also known as a syndicate of co-ownership (or syndicate of co-owners) in Quebec, or a strata corporation in British Columbia—is the organization that represents all the co-owners of a condo building. In this type of housing, each condo owner owns a private unit in the building and shares ownership of common areas like corridors, the lobby and the roof.
A condo corporation isn’t a business in the traditional sense. But it is a separate legal entity from the co-owners. Through a board of directors, sometimes called a condo board (or a strata council in British Columbia), it manages budgets, negotiates agreements, signs contracts and may be held liable for certain damages. That’s why a condo corporation has to have appropriate business insurance to cover its responsibilities, rather than relying on personal home insurance.
To do its job, the condo board needs different coverage than the condo owners.
Condo corporation insurance vs. condo unit owner insurance: A comparison
Condo corporation insurance and condominium unit owner’s insurance are designed to work together. Condominium corporation insurance protects the building and the common property. It can cover some parts of the condo units too, but only to a certain extent (based on the description of a standard unit). Compare that to condo unit owner insurance policies, which cover the condo owner’s belongings and personal liability, as well as any improvements they’ve made to their unit.
It’s an important difference to bear in mind, because a claim doesn’t necessarily just affect the building—it can have an impact on the contents, too. Picture this: A condo owner is out of town for the weekend and their dishwasher springs a leak, causing damage to the neighbouring unit. Unless the kitchen cabinets and flooring have been renovated by the unit owner, they would typically be covered by the condo corporation’s insurance. Any water damage to furniture, small kitchen appliances and personal belongings would be covered by the condo owner’s own home insurance.
Insurance coverage table
| What’s covered | Condominium corporation insurance policy | Condo unit owner insurance policy |
|---|---|---|
| Common areas (roof, corridors, elevators, building structure, etc.) | ✅ Covered | ❌ Not covered |
| Individual condo unit (standard unit description) | ✅ Covered | ❌ Not covered |
Individual condo unit (improvements and betterments to the unit, such as countertops, cabinets and flooring) | ❌ Generally not covered | ✅ Generally covered |
| Personal property (furniture, clothing, electronic devices) | ❌ Not covered | ✅ Generally covered |
| Condo corporation’s liability | ✅ Covered | ❌ Not covered |
| Condo owner’s personal liability | ❌ Not covered | ✅ Covered |
What you need to know about unit improvements and betterments
While a condo unit may be covered by both the condo owner’s home insurance and the condo corporation’s insurance—the two policies don’t cover the same things.
Here’s an example. A condo unit originally came with laminate countertops and floating floors. A few years later, the condo owner upgraded to granite countertops and hardwood flooring instead.
In the event of a fire, for instance, the condo corporation’s insurance would only cover the cost of restoring the unit to its original state, based on the standard description of the privately owned units in the building.
In other words, the condo could be rebuilt with the original laminate countertops and floating floor. That’s where the unit owner’s personal home insurance policy comes in—to cover the additional cost restoring the upgrades.
For the condominium corporation, it's important to have a clear definition of the standard unit, as it serves as the reference when assessing damage after a claim.
The main risks to consider for condo corporation insurance
The main risks a condo corporation may face include those related to the building, property management, third-party liability and cyber risk. For instance, water damage could affect multiple units in the building or there could be a mechanical failure. Someone could get injured in one of the common areas. Or what if hackers gained access to the condo corporation’s bank account? Without the right insurance, situations like these could be very costly for a condo association. Here are some examples of risks to bear in mind.
Building-related risks
The building is typically the condo unit owners’ biggest asset—and also its biggest responsibility. And like any building, it can be damaged by unexpected events. A pipe can suddenly burst. A fire can damage part of the building. A severe storm can damage the roof or windows. If something happens in one of the units, the damage might affect other condo owners too—or the shared spaces. Did you know that water damage is one of the most frequent causes of claims for condo owners and condo corporations?
Having business insurance can help limit the financial consequences of a loss. But it’s no substitute for routine building maintenance. Maintaining the building and responding quickly to problems can help prevent incidents and limit damage.
How to choose the right coverage limit (market value or rebuilding cost)
Choosing the right condo insurance is important, but it’s just as important to choose the right coverage limit. You might think the market value (its sale price) of the building would determine the insurance requirements, but it’s actually better to calculate the building repair costs instead.
The cost of rebuilding might include things like:
- Demolition costs
- Debris removal and site cleanup
- Construction permits for rebuilding
- Architect, engineer and contractor fees
- Work to bring the building up to code
- Restoring individual condo units to the original standard
- Some shared spaces and common features of the building
The market value of a building might stay the same for several years. However, the reconstruction cost could go up because of the price of materials, labour and any building upgrades. It’s a good idea for condo boards to have appraisals done periodically to keep pace with changing costs as the building ages and to help ensure that the building is properly insured in the event of a claim. In Quebec, the adoption of Bill 141 introduced a legal requirement for condo syndicates to have buildings appraised every five years.
Administration-related risks
The members of a condo corporation’s board of directors regularly make decisions that can have a major impact on the building and the condo owners. In some cases, board members may even be personally sued if a decision or the way a matter is handled causes harm.
Directors and officers liability insurance can help reduce the financial impact of situations like these. For example, insurance that covers liability for directors could pay for the legal costs associated with a dispute.
That’s why it’s important for condo boards to carefully consider their choice of insurance. From coverage to deductibles or insurance amounts, these decisions can have a direct financial impact on all condo owners.
Choosing an insurer that understands the realities condo corporations face can be a big help to the condo board when it comes to making insurance decisions.
What happens when a condo board’s decisions are called into question
Here are some examples of how a condo board’s decisions could be challenged.
- Postponing major maintenance projects: If the condo board decides to put off replacing an aging roof or plumbing system, a water leak could cause significant damage down the road, prompting some unit owners to question their decision.
- Selecting an inferior contractor: If a visitor slips and falls on ice, unit owners could question how the condo board selected the snow removal contractor, especially if it failed to verify the contractor’s insurance and experience.
- Failing to comply with building bylaws: If a barbecue fire on a balcony causes damage to the owner’s unit and other units in the building, despite there being a bylaw prohibiting barbeques on balconies, the affected unit owners could question the condo board’s diligence in enforcing the bylaws—and take legal action.
Depending on the circumstances and the provisions of the insurance policy, directors and officers liability insurance (also called D&O liability insurance) could cover the defence costs and some of the financial losses associated with a claim.
Bodily injury or property damage caused to third parties
Condo corporations can be held liable if someone suffers bodily injury or property damage as a result of an event related to the building. A fire could spread to a neighbouring building, for example, or someone could be injured after a fall in a poorly maintained common area. In cases like these, commercial general liability insurance could help protect condo corporations against the financial consequences of a claim.
Cyber risks
Every condo association should consider cyber risk insurance. Because they do so much administrative work online (sending and receiving emails, making and receiving electronic payments and saving documents and information), there’s always a risk of fraud or data theft. Condo corporations also have a responsibility to ensure the privacy of unit owners’ personal information. This can include their email address and phone number, as well as financial information and documents related to building administration. If a privacy breach occurs, information like this could be compromised. A laptop could be lost or stolen, for example. Fraudsters could also send a fake invoice by email and trick condo board directors into transferring money to a fraudulent account. Cyber risk insurance could help the condo association limit their financial losses and support the people affected by the incident.
Other risks to consider
Depending on your building’s features and the risks it’s exposed to, some types of additional coverage may be worth considering:
- Sewer backup and flooding: Aging infrastructure and extreme weather can increase the risk of water damage.
- Equipment breakdown: This coverage could come in handy for protecting key equipment needed for the building to operate—think elevators, heating systems and mechanical and electrical systems.
- Earthquake: The damage caused by an earthquake can be devastating. Earthquake risk varies by region, so depending on where a condo building is, earthquake coverage could be worth considering.
- Loss of income: Even if a loss is covered by insurance, some circumstances can interrupt income or incur additional expenses for a condo corporation. Loss of income coverage can help protect against these types of financial situations.
What are a condo corporation’s legal insurance obligations?
In Canada, the legal obligations for condo associations to have insurance vary by province and territory. Generally, condo board directors have a responsibility to make sure that the building has adequate coverage for its needs and the risks it’s exposed to. They also have to be sure that their insurance decisions take the interests of all condo unit owners into account.
In most condo living situations, this means insuring the building, covering the condo association’s third-party liability and choosing coverage limits that reflect the reconstruction value of the building. Even if they’re not required by law, many of these measures are considered best practices for management and risk prevention.
Different provincial and territorial requirements
Insurance requirements vary by province and territory. Many Canadian jurisdictions have legislation governing condominium management and outlining certain responsibilities of condo corporations.
In general, condominium corporations are required to insure the building, maintain liability coverage and carry enough insurance to cover reconstruction costs. Some provinces also have specific insurance requirements that condo corporations must meet. In Quebec, for example, certain aspects of condo insurance policies are governed by the Civil Code of Québec and other applicable legislation, including amendments introduced by Bill 141 and Bill 16.
Specifically, in Quebec, condo syndicates are required to have insurance for the building, liability insurance for the syndicate and insurance to cover the liability of directors. They’re also required to have a self-insurance fund and have the reconstruction cost of the building appraised periodically. The Autorité des marchés financiers (AMF) also provides condo syndicates with practical information on their legal obligations and the relevant insurance coverages.
Even when they’re not mandatory, many of these measures can help protect the building, the syndicate and the co-owners.
Reporting a loss doesn’t always mean making a claim
Condo associations report a loss to the insurer as soon as they discover it—even if the damage seems minor or the cost of repairing it is likely to be lower than the deductible.
Reporting a loss allows a condo corporation to document it, get advice, and assess the available options. It doesn’t necessarily have to lead to a claim. If the cost to remedy the damage is close to the amount of the deductible, it can be a good idea to talk about the different options with the insurance company.
Building coverage goes hand in hand with risk prevention
Choosing condominium corporation insurance is about more than just selecting the right coverage options. It also involves preventing risks by making sure the building is properly maintained and having a contingency fund or reserve fund to plan significant long-term expenses.
If you volunteer on a condo board, you might want to consider reaching out for professional guidance to make sure you’re aware of the insurance available, the coverage limits and the potential consequences of making a wrong decision.
Want to know more about condo corporation insurance? Our certified insurance agents are here to answer your questions and help you find solutions that are tailored to your needs. Call 1-866-472-8848 for advice.
Frequently asked questions about condo corporation insurance
The requirements for condo association insurance in Canada vary between provinces and territories. Generally, condo board directors must ensure that the building is adequately protected against the risks it’s exposed to.
In Quebec, under the Civil Code of Québec and reforms introduced by Bill 141 and Bill 16, condo syndicates must meet several requirements, including carrying building insurance and directors’ liability insurance, maintaining a self-insurance fund and having the building’s reconstruction cost appraised every five years.
Condominium corporation insurance and condominium unit owner’s insurance are different types of condo insurance policies that are designed to work together. The corporation’s insurance generally covers the building itself, including the common areas and some standard parts of the condo units. Compare that to condo unit owner’s home insurance—this covers the condo owner’s personal property, liability and improvements to their unit. For example, in the event of a loss, the condo corporation’s insurance might only cover the cost of restoring the condo to its original state. If the condo owner has upgraded the original flooring to hardwood flooring, this improvement may be covered by their own condo insurance instead. It’s important for condo board directors to understand the difference so they can keep condo owners informed. Documents like a condominium declaration and the description of individual units can also help clarify who is responsible for what when it comes to insurance.
Yes. In some situations, condo board directors could be held personally liable if they are alleged to have made a poor decision, failed to act or failed to properly follow up on an issue. For example, a condo owner could raise concerns about a building leak that’s been getting worse for months, especially if it’s causing significant damage. Failure to comply with building bylaws or managing a contract improperly could also expose directors to legal action. Directors and officers liability insurance could cover the defence costs and some of the financial losses associated with a claim, depending on the provisions of the insurance policy.
Yes. Members of a new board of directors often inherit files, decisions and issues that date back several years. For example, a known maintenance problem that has been repeatedly postponed, incomplete follow-up on a matter or certain insurance-related decisions may continue to have consequences long after the board members who made them have left.
That's why continuity is important. Thorough documentation of decisions and proper follow-up on outstanding matters can help support sound risk management.
Yes. When an insurance decision could have a significant financial impact on condo owners, it’s a good idea to discuss it as a group. In practice, important decisions for a condo association might mean choosing specific coverage options or insurance deductibles—or opting not to maintain certain coverages.
Making sure all the condo owners are consulted helps everyone understand the risks the building is exposed to, and it can also highlight the potential consequences of certain decisions. For example, choosing a higher deductible could lower the cost of the insurance premium. But there’s a trade-off. In the event of a claim, the condo corporation would have to pay a higher portion of the cost. Documenting decisions like these in meeting minutes is a way to promote sound governance. If co-owners have the opportunity to share their thoughts and vote on important matters, it helps everyone understand the choices made by the condo board directors.
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Certain conditions, exclusions and limitations may apply. The terms and conditions of the coverages described are set out in the insurance policy, which always prevails. These tips are provided for information and prevention Desjardins Insurance cannot be held liable for them. We recommend using caution and consulting a certified insurance agent for comprehensive, tailored advice.