A condominium corporation must maintain insurance to protect common property and condominium units (in conventional condominiums) against loss resulting from destruction or damage. The condo corporation must also maintain insurance against liabilities incurred by board members and the corporation itself in carrying out their duties.
A corporation can also impose insurance requirements on owners. For example, a corporation may, by bylaw:
- Require owners to purchase insurance for deductibles that may be payable to a corporation
- Specify the particulars of deductible insurance to be purchased and
- Specify the proof an owner must provide the corporation of purchased insurance
Insurance is a complex topic. To learn more, go to the Insurance Bureau of Canada for further information.
The condominium corporation must place and maintain insurance in the amount of the replacement value of the insured property. A corporation is required to maintain insurance to protect common property against loss resulting from destruction or damage caused by:
- Fire and/or leakage from fire protective equipment
- Explosion of natural, coal or manufactured gas
- Water damage caused by flood
- Water damage caused by sewer back-up or the sudden and accidental escape of water or steam from within a plumbing, heating, sprinkler or air conditioning system or a domestic appliance that is located within an insured building
- Impact by aircraft, spacecraft, watercraft and land vehicles
- Riot, vandalism or malicious acts (other than vandalism or malicious acts caused by an owner, occupant or tenant to the unit) and
- Any other causes as required by the condominium by-laws.
For bare land condominium units, condo corporations must maintain insurance on common property against loss resulting from destruction or damage caused by the perils listed above.
Tip for condo boards: Condominium corporations can maintain insurance on units and/or common property against additional perils other than the ones required by law. Check with your insurance representative and/or lawyer to determine the appropriate amount of insurance coverage for you.
The amount of insurance on condominium units depends on the type of unit. Condominium corporations must, at a minimum, place and maintain the following amount of insurance:
- Residential units on the parcel owned by the developer: the replacement value of units and of the fixtures and finishing as they existed at the time of the condominium plan’s registration
- Non-residential units on the parcel used in connection with a residential purpose (e.g., parking spaces and storage units for owners): the replacement value of the units and of the fixtures and finishing, as were typically provided to purchasers by a developer
- All other non-residential units on the parcel: the replacement value of the units, excluding the replacement value of any fixtures and finishing in the unit
- Units on the parcel owned by the corporation: the replacement value of the units and of the fixtures and finishing in the unit
A corporation can increase the amount of insurance for residential units on the parcel (other than those owned by the developer) to reflect a higher replacement value. This may happen if the corporation determines that there are variations (e.g., in size or in other material factors) from the standard insurable unit descriptions among the units in a class of residential units.
Unless required by the corporation’s bylaws, a corporation’s insurance does not extend to any improvements made to the units by the owners. For residential units, improvements do not include any property included in the standard insurable unit description. For non-residential units, improvements do not include any fixtures and finishing that must be insured by the corporation.
A corporation also has to maintain insurance to protect itself from any liabilities incurred by board members and the corporation itself when they are carrying out their duties and responsibilities. The insurance, however, does not extend to liability incurred by board members when they fail to:
- Act honestly and in good faith
- Exercise care, diligence and skill to the reasonable person standard
To learn more about these standards of conduct, go to the Condo board conduct page.
Tip for condo boards: Check the condo corporation’s bylaws regarding insurance and make sure you obtain the advice of an insurance representative and/or lawyer to determine the appropriate amount of insurance coverage for you.
Personal Home Insurance
The corporation’s insurance does not protect your personal possessions or liability. You should always buy homeowner’s insurance to cover your personal possessions and liability. Unless the bylaws say otherwise, your condominium corporation’s insurance will not cover improvements made to your unit. An insurance broker will be able to review the condominium corporation’s insurance policy and advise you about what type of condominium homeowner’s insurance is best for your situation.
Insurance against fraudulent or dishonest acts
Condominium corporations must obtain at least one corporate insurance policy (also known as “fidelity bonds”) that is enough to cover loss directly caused by a fraudulent or dishonest act of a board member or a manger.
The amount of coverage under the insurance policies must be in an amount that is at least the amount (if any) set in the corporation’s bylaws. If no amount or criteria is set in the corporation’s bylaws, the amount of coverage must be at least the sum of the reserve fund balance at the start of the current fiscal year and the balance of the operating account during the previous 12 months.
The corporation must review the amount of the insurance policies at least every 2 years and adjust if necessary.
The requirement for fidelity bonds does not apply if the certificate of title to each of the units in the condominium plan is registered in the name of the same owner or same group of owners.
What is a standard insurable unit description (SIUD)?
A standard insurable unit description is a description given to purchasers by the developer or as adopted by the corporation. It consists of typical standard fixtures and finishing in a residential unit or class of residential units. A standard insurable unit description must include a description of the typical features in the unit(s). For example:
- Floor coverings, wall coverings and ceiling coverings
- Electrical lines and fixtures (includes lighting fixtures)
- Plumbing lines and fixtures
- Natural gas lines and fixtures
- Air exchange and temperature control fixtures
- Walls that do not form the unit’s boundaries, and any windows/doors located in those walls
- Cabinets and counter tops
- Non-chattel appliances
If you are a purchaser or owner and looking for the standard insurable unit description, you can request one from your condominium corporation. Upon receiving the request, the corporation has 10 days to provide the document to you. To learn more, go to our page on Information and Document Requests.
How does a corporation adopt or amend a standard insurance unit description (SIUD)?
If a developer does not prepare and provide a standard insurable unit description, the corporation must ensure that a standard insurable unit description has been adopted for each class of residential units.
If there are 2 or more classes of residential units on the parcel, the corporation must identify the standard insurable unit description that applies to each unit.
A corporation can adopt or amend a standard insurable unit description through a special resolution, ordinary resolution (if the corporation has not passed a special resolution) or board resolution (if the corporation has not passed a special or ordinary resolution).
There are certain disclosure requirements when a corporation adopts or amends the standard insurance unit description. For example:
- Standard insurable unit description adopted by board resolution: the description must be presented as an agenda item at the next AGM for ratification/amendment by ordinary resolution.
- Standard insurable description adopted by special resolution or ordinary resolution or amended by ordinary resolution: the corporation must file at land titles office a notice containing the most current standard insurable unit description (applicable to all classes of residential units).
The notice to land titles must be submitted for filing in a form acceptable to the Registrar, and must contain:
- The type of resolution under which the standard insurable unit definition was adopted/amended
- Certification that the resolution was duly passed
- The seal of the corporation and
- Any other information required by the Registrar
What is an insurance deductible?
An insurance deductible is money that must be paid to the insurer before the insurer will pay out any expenses for a claim.
If damage for a claim originates in or from an owner’s unit (or owner’s exclusive possession area), then the condominium corporation can claim back an insurance deductible from the owner, up to a maximum of $50,000. In such a situation, the owner is “absolutely liable” to the corporation on demand by the corporation. This means that whether or not there was any proven negligence, the owner is liable for the corporation’s deductible.
For example: there is water damage to a condominium building that came from an owner’s unit. The condominium corporation can only make the owner liable for the deductible limit up to $50,000. If the deductible is $15,000, then the owner is liable for $15,000. But if the deductible is $75,000, then the owner is only liable for $50,000 (the maximum amount).
But there are certain situations where an owner is not liable for the deductible. For example, if the claim arose from the following:
- A defect in the construction of the owner’s unit or exclusive possession area
- Damage due to an act or omission of the corporation, board member, officer, employee or agent of the corporation (or any combination of them)
- Normal structural deterioration of the common property, managed property or real property, other than the property that the owner was responsible for maintaining or repairing
Tips for owners
- Some insurance companies offer owners deductible coverage that will help pay for the corporation’s deductible. Check with your insurance representative to discuss this type of coverage. It is prudent to request to add coverage.
- You can ask your board, manager or corporation’s insurance broker for a copy of the corporation’s Certificate of Insurance, which outlines current deductible amounts.
- If you already have deductible coverage in your unit owner’s policy, it is prudent to adjust your deductible coverage accordingly.
What happens if a condo corporation and owner place insurance on the same loss?
If a condo corporation and owner both place insurance against a loss resulting from destruction of/damage to units or the common property, then the corporation’s insurance is considered first loss insurance. The owner’s insurance is considered excess insurance.
Tip for condo boards and owners: If you have questions about first loss or excess insurance and how it applies to your situation, ask your insurer. If a dispute arises over insurance coverage, you should seek legal advice.
What happens when there are insurance coverage changes?
When there is a change to insurance coverage (e.g., the deductible amount, replacement value of coverage or additions to permitted exclusions), a corporation must provide owners with written notice of the change and a copy of the insurance certificate reflecting the change within 30 days of receiving the insurance certificate.
The corporation must also provide notice to owners of the following insurance information:
- Standard insurable unit description (for a residential unit)
- A notice of cancellation (if the corporation receives a notice of cancellation of an insurance policy)
Last updated: January 2020