It’s very likely that you’ve already heard about what’s going on in BC’s condo insurance market these days. There’s been much in the news lately due to some cases of very large increases in condo building insurance premiums, and some are calling it a “crisis” even. This post will try to realistically explain what the fuss is all about, and if you should or shouldn’t be concerned.
Condo (& Home) Insurance Rates Usually Go Up
The first thing to mention is that it’s common for the cost of insurance for condos and homes to go up over time.
Home Values Usually Go Up
One reason that condo or home insurance rates usually go up is because, in general, the assets that they are insuring (real estate properties) are usually going up in value over time. This means the cost to repair (or even completely replace) the property in case of an accident or natural disaster becomes more expensive too. Insurance companies need to increase their condo or home insurance premiums to customers in order to make up for this increasing risk. Even if we just consider inflation (which is a generally understood increase in costs and values over time, and is usually known to be around +2.5% per year), we can expect an increase of about 5% every two years. However, many properties have increased in value much more than that, and that has especially been the case in BC.
Natural Disaster Risks Are Increasing Too
On top of the fact that most property values are increasing every year (and insurance companies need to make up for that) is the fact that the risks of natural disasters from fires, earthquakes, floods, winds, etc. are also increasing every year. This means more condo or home insurance claims, meaning more costs and risks for insurance companies that need to be covered. The only way insurance companies can make up for this increasing risk and ensure they are in a stable position in the market is to increase premiums to consumers.
The “Crisis” Cases Are Still Rare, For Now
Another thing to mention is that the cases that have caused some to label this a “crisis” are still rare (at least for now).
Some Condo Buildings Have Seen 300%+ Increases In Insurance
Yes, some condo buildings have seen their insurance premiums increase 300% to 500%+ which is frightening. However, this is only the case for select condo buildings for the most part.
Some Have Been Unable To Get (Re-)Insured At All
The scariest scenarios are those of condo buildings not being able to get or renew their insurance at all. This causes banks to re-consider providing mortgages to units in those condo buildings, which means new potential buyers are unable to get approved for financing (leaving owners pretty much unable to sell). Current owners could also even see their current mortgages being pulled altogether – which would force consumers into bankruptcy. Again, these cases are also rare and seem to be happening to only some select condo buildings.
BC Condo Buildings Most At Risk
The condo buildings in BC that seem to be at most risk of seeing the above types of “crisis” scenarios are:
Older & Unkept Condo Buildings
The older and unkept condo buildings are at risk because the materials that make-up the building structure are getting old, especially if the building hasn’t been properly maintained over time. Older and unkept buildings are more prone to claims as well as damage during natural disasters.
Condo Buildings With Many Claims
Even if your condo building isn’t that old and has been relatively well-maintained, if the condo building has needed to submit a high number of claims to it’s insurance provider, then the insurer will see that building as having more risk. Maybe your building’s elevator keeps breaking down and needing to be fixed/replaced, or maybe your condo building’s pool has had some issues with leaks – the more claims your building has, the more costs or risks insurance companies face and need to make up for.
Under-Insured Condo Buildings
Another factor that might contribute to significantly high increases to your condo insurance is if your condo building has been “under-insured” for some time. If insurance companies have been slow to catch-up to increasing costs and risks associated with your condo building, then they will need to catch up and make up for that lost ground by significantly increasing the insurance premiums.
What Can BC Condo Owners Do?
The best advice we can give current condo owners is to stay in good communication with 1. their condo building’s strata corporation, 2. their personal and condo building’s insurance provider(s), and 3. their banks.
The first condo owners to hear any news about their condo building’s insurance will be the building’s strata group, so being a part of the group or staying in good communication with the group members will enable you to hear any news sooner rather than later. If possible, directly stay in contact with your building’s (and your own personal) insurance provider(s) yourself too. Being in contact with your bank or mortgage provider is also recommended.
Contact Harbord For More Info and/or A Quote!
If you’re looking for more information or would like a free insurance quote, we encourage you to contact Harbord today! We’d be happy to help you in any way that we possibly can.