You need home insurance to get a mortgage on a home, why dont you need condo insurance to get a mortgage on a condo?
The short answer is that the condo corporation’s insurance covers returning your condo back to its original state after damage, so if you burn it down the bank doesn’t really care because they know the condo corp has to return it to its original state on occupancy, (minus your personal belongings of course) and then the condo corp charges you back the lessor of the deductible or the cost of the repairs.
Seems simple enough doesn’t it?
If you want to protect your belongings you need condo insurance which costs approx $250 a year. It goes beyond that though, if for example you turn on your bathtub and forget about it flooding several units below, or leave the stove on and burn your condo down and damage other units, you have been negligent and you are going to get sued by your neighbours.
What about that deductible charge back, is it a big deal?
As you may have heard many new condos have had trouble with flooding the first few years after construction. The insurance companies hate paying out so they address the issue by raising the condo corps insurance deductible for floods. I’ve seen deductibles as high as $100,000, when a standard flood deductible is $10,000. What does that mean for you? Well many insurance policies wont cover deductible charge backs over 25,000. When you buy your condo insurance make sure you read the fine print and make sure there is no cap on the deductible charge-back coverage.
P.S to all the Landlords out there… don’t let your tenants move in without tenants insurance, write it into the lease and don’t give them the keys without proof of insurance. Your insurance will not cover their contents, any hotel stay or damage to their belongings. If you have a major flood and they have to vacate for a significant amount of time you will likely lose them as tenants and lose at least one or two months of rent.
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