Likely, you’ve already heard about what’s happening in BC’s condo insurance market. There’s been a lot in the news lately due to some cases of substantial increases in condo building insurance premiums, and some call it a “crisis”. This post will try to explain the fuss 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 that, generally, the assets that they insure (real estate properties) are 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. Insurance companies need to increase customers’ condo or home insurance premiums to make up for this increased risk. Even if we 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 yearly (and insurance companies need to make up for that) is that the risks of natural disasters, from fires, earthquakes, floods, winds, etc., are also increasing yearly. 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 increased risk and ensure they are in a stable position in the market is to increase premiums to consumers.
READ: Climate Change Is Affecting The Cost Of Insurance. Here’s Why.
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 by 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 condo buildings not being able to get or renew their insurance. This causes banks to re-consider providing mortgages to units in those condo buildings, which means new potential buyers cannot get approved for financing (leaving owners pretty much unable to sell). Current owners could also see their existing mortgages being pulled altogether, forcing consumers into bankruptcy. Again, these cases are 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 the 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, primarily if the building hasn’t been adequately maintained over time. Older, unkept buildings are more prone to claims and 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 to submit a high number of claims to its 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 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. Suppose insurance companies have been slow to catch up to increasing costs and risks associated with your condo building. In that case, they will need to catch up and compensate 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. Contact your building’s (and your own personal) insurance provider(s) if possible. Being in touch with your bank or mortgage provider is also recommended.
Contact Harbord For More Info And Quotes!
If you’re looking for more information or a free insurance quote, we encourage you to contact Harbord today! We’d be happy to help you in any way possible.
