Real Estate

Condo Insurance Premiums Are Spiking In Canada, Threatening Resale Prices

  • Last Updated:
  • Jun 16th, 2020 7:51 pm
Deal Fanatic
Oct 7, 2007
9404 posts
5374 upvotes
Inflation isn't a real measure of inflation, by any means. The continued YOY RATE increases in taxes and insurance products is going to be really tough on Canadians.
Deal Fanatic
Oct 7, 2007
9404 posts
5374 upvotes
I am curious if anyone knows the REAL reason(s) why condo insurance is spiking? I have heard and read some one-off stories on this subject but I can't help but think there is more to it that isn't being properly reported. I have thought about calling a couple of insurance brokers to find out what they know because there has to be some explanation for why this is a widespread phenomenon, especially now that condo buildings are going up like gangbusters.
Deal Guru
Dec 20, 2018
10120 posts
10230 upvotes
JayLove06 wrote: rent control 1.8%
But condo fees are just a small portion of the rent. Not like mortgage went up that amount. It's fixed mostly and mortgage is largest component of the rent for majority of property owners

It's like saying meeting expenses went up 5% in condo budget but rent only went up 1.8%> doesn't mean there's a shortfall of 3.2%
Deal Addict
Nov 2, 2014
1137 posts
450 upvotes
Scarborough, ON
choclover wrote: I am curious if anyone knows the REAL reason(s) why condo insurance is spiking? I have heard and read some one-off stories on this subject but I can't help but think there is more to it that isn't being properly reported. I have thought about calling a couple of insurance brokers to find out what they know because there has to be some explanation for why this is a widespread phenomenon, especially now that condo buildings are going up like gangbusters.
Among many other things here are 2 big factors which do not get enough play:

1. Less capacity/competition in the market (some carriers such as AIG are leaving the Canadian market).

2. The big one - the rates for reinsurance are going up a ton.
Deal Fanatic
Oct 7, 2007
9404 posts
5374 upvotes
RobertSmalls008 wrote: Among many other things here are 2 big factors which do not get enough play:

1. Less capacity/competition in the market (some carriers such as AIG are leaving the Canadian market).

2. The big one - the rates for reinsurance are going up a ton.
Can you shed more light on this? I am not sure I understand what is driving such rates to go up.
Deal Guru
User avatar
Mar 31, 2008
13010 posts
3095 upvotes
Toronto
Can't wait for these condo owners starting to pay their fair share for taxes this next assessment. I mean a 2 bedroom condo now going for 900K? But being charged at 500K? Absurd!
Deal Addict
Feb 7, 2006
2470 posts
1415 upvotes
I have no further details other than what was posted, but someone on reddit (in Toronto) said they were faced with a $800 special assessment this year due strictly to insurance premiums
This assessment is a direct result of unforeseen issues including....recent industry wide increase insurance premiums of up to 70% - for your building, the insurance premium increased 61.7% in 2018/2019 and 58.7% in 2019/2020
https://old.reddit.com/r/PersonalFinanc ... sts_of_60/
Deal Fanatic
Oct 7, 2007
9404 posts
5374 upvotes
winner2000 wrote: I have no further details other than what was posted, but someone on reddit (in Toronto) said they were faced with a $800 special assessment this year due strictly to insurance premiums



https://old.reddit.com/r/PersonalFinanc ... sts_of_60/
Similar thing is happening out West. Would be really interesting to know what is causing this crazy increase. Nothing I have heard really answers the question for me so far.
Deal Expert
User avatar
Nov 15, 2004
21783 posts
4903 upvotes
Toronto
choclover wrote: Similar thing is happening out West. Would be really interesting to know what is causing this crazy increase. Nothing I have heard really answers the question for me so far.
Chair girl isn't the only rowdy Airbnb guest, and renters don't care about the common spaces or insurance premiums. Condos everywhere are also poorly built these days, and don't hold up well to climate change. Things like this are also becoming commonplace:
https://www.theglobeandmail.com/news/to ... e35270018/
https://toronto.citynews.ca/video/2015/ ... -vehicles/
Deal Addict
User avatar
Nov 2, 2007
1424 posts
394 upvotes
GVRD
choclover wrote: Similar thing is happening out West. Would be really interesting to know what is causing this crazy increase. Nothing I have heard really answers the question for me so far.
I work in the Insurance Industry. We are in a hard insurance market (high demand and reduced supply), add that to huge losses and payouts and you end up where we are now.

I think the BC provincial government will need to step in and make changes to the Strata Act with respect to these enormous deductibles because in BC these can be assessed back to the individual unit owners and the amounts are crippling. However, government intervention may increase rates even further.

In a few years time, my guess is that the average condo contents insurance premium will be in the $1300-1500 range just due to the exposure and ongoing losses (mostly water)
Deal Fanatic
Oct 7, 2007
9404 posts
5374 upvotes
chenwaa123 wrote: I work in the Insurance Industry. We are in a hard insurance market (high demand and reduced supply), add that to huge losses and payouts and you end up where we are now.

I think the BC provincial government will need to step in and make changes to the Strata Act with respect to these enormous deductibles because in BC these can be assessed back to the individual unit owners and the amounts are crippling. However, government intervention may increase rates even further.

In a few years time, my guess is that the average condo contents insurance premium will be in the $1300-1500 range just due to the exposure and ongoing losses (mostly water)
I don't think government stepping in to solve anything will make things better or less expensive. History has shown us this and if anything will lead to even more socialism. And whatever government does, it will not reduce the actual cost of restoration when it comes to property damage. It may just shift the burden.

How much would you say is the average condo insurance premium today? I am just curious how much of an increase people are looking at as the industry is changing in this area.
Deal Addict
User avatar
Nov 2, 2007
1424 posts
394 upvotes
GVRD
choclover wrote: I don't think government stepping in to solve anything will make things better or less expensive. History has shown us this and if anything will lead to even more socialism. And whatever government does, it will not reduce the actual cost of restoration when it comes to property damage. It may just shift the burden.

How much would you say is the average condo insurance premium today? I am just curious how much of an increase people are looking at as the industry is changing in this area.
In BC, the government could and probably should adopt changes to the Strata Act that limit how much of the Strata Building policy deductible can be assessed to an individual unit owner. I'm not licensed in AB, but my understanding is that they recently changed their rules to limit Deductible Assessments to no more than $50,000; deductibles higher than that would need to be shared among all owners.

In BC, we are seeing $250,000, $500,000 and even $750,000 Strata Water Damage deductibles, and these can be assessed to one unit owner, even when there's no negligence on their part.

The problem is that you can't purchase coverage on your underlying Condo contents policy for deductibles this high. $100,000 is the limit with most standard markets and there are only a few that will offer coverage up to $250,000. I'm not aware of any insurer in BC offering Strata Deductible assessment coverage higher than $250,000 and so what's an owner to do?

This could easily lead to bankruptcy for an owner who can't come up with the deductible money. IMO the market is broken in it's current state (partly due to the government and their poor building code) and so only they will be able to fix this current mess by amending the Strata Act. But I do agree about rates, government intervention might solve a coverage issue but it will not result in any cost savings, in fact it will likely make insurance even more expensive, but at least those costs can be spread out among more owners.

There are so many variables at play in determining rates, but most people can obtain a standard Condo Contents policy with good coverage for about $500-$700 annually. However, with respect to the building policy, we are hearing about 200% to 700% increases and those are scary numbers for most.
Deal Addict
Jun 28, 2018
1031 posts
789 upvotes
Toronto
choclover wrote: I am curious if anyone knows the REAL reason(s) why condo insurance is spiking? I have heard and read some one-off stories on this subject but I can't help but think there is more to it that isn't being properly reported. I have thought about calling a couple of insurance brokers to find out what they know because there has to be some explanation for why this is a widespread phenomenon, especially now that condo buildings are going up like gangbusters.
Apparently, for the insurance companies condos are a poor performing asset class and claims have been going up, so the insurance companies have been adjusting premiums and deductibles to reduce exposure. My condo said they had difficulties finding a company willing to insure and as an effect our premiums went up and deductible went up something like 10x.

My condo insurance jumped 35% late last year.

With those low quality builds we heard about years ago (remember things like falling glass windows or windows not expected to last long from the weather?) it probably wouldn't be surprising that these things are starting to hit. Plus we've been experiencing more wet weather, which can cause damage.
The Distracted Investor

Dividends through quality companies 😃 Though I usually lose money with trades :facepalm:
Deal Addict
Dec 4, 2016
2011 posts
1030 upvotes
chenwaa123 wrote: In BC, the government could and probably should adopt changes to the Strata Act that limit how much of the Strata Building policy deductible can be assessed to an individual unit owner. I'm not licensed in AB, but my understanding is that they recently changed their rules to limit Deductible Assessments to no more than $50,000; deductibles higher than that would need to be shared among all owners.

In BC, we are seeing $250,000, $500,000 and even $750,000 Strata Water Damage deductibles, and these can be assessed to one unit owner, even when there's no negligence on their part.

The problem is that you can't purchase coverage on your underlying Condo contents policy for deductibles this high. $100,000 is the limit with most standard markets and there are only a few that will offer coverage up to $250,000. I'm not aware of any insurer in BC offering Strata Deductible assessment coverage higher than $250,000 and so what's an owner to do?

This could easily lead to bankruptcy for an owner who can't come up with the deductible money. IMO the market is broken in it's current state (partly due to the government and their poor building code) and so only they will be able to fix this current mess by amending the Strata Act. But I do agree about rates, government intervention might solve a coverage issue but it will not result in any cost savings, in fact it will likely make insurance even more expensive, but at least those costs can be spread out among more owners.

There are so many variables at play in determining rates, but most people can obtain a standard Condo Contents policy with good coverage for about $500-$700 annually. However, with respect to the building policy, we are hearing about 200% to 700% increases and those are scary numbers for most.
Thank you for the update from the inside. With the current rhetoric in BC provincial government, condo owners should be thankful if they are not executed by firing squad for their ill gotten equity gains. Asking the government for help would be kinda daring. At least for downtown Vancouver, insurance going up by $1000 per year doesn't sound like a huge shock for the average 600k condo, relative to the cost of capital. After all, interest rates fluctuate by up to 1% even in the past decade.

I still believe that condos are only worth buying when it's at a huge discount relative to freeholds in the same area. The land underneath has to be worth something, preferably half of the building cost i.e. $1000/sqft condo when current construction cost is about $500/sqft.
Deal Fanatic
Oct 7, 2007
9404 posts
5374 upvotes
I have lived in condos before but never owned one. Ironically, one of the nicest condos I lived in was less than five years old, a very luxurious building with no visible evidence of water damage, but was undergoing a massive assessment due to the "leaky condo crisis" while we were there. We got to see how that all unfolded and it was extremely stressful for the owners and that was when condos were totally affordable.

I am starting to think that buying and owning a condo is a complex process and there is a lot to know before one wants to purchase one. I would expect hiring a lawyer to assist with understanding all of the obligations associated with the particular condo in question including insurance liability would probably be strongly recommended to avoid any unexpected surprises down the line.

It is sad that this insurance inflation is happening to condos. Hopefully, it will get sorted out in the long run. Especially now that every spare square of land in Vancouver has a high rise on it.
Deal Addict
Nov 2, 2014
1137 posts
450 upvotes
Scarborough, ON
One of the top 5 insurers in Ontario is raising their condo insurance premiums an average of 13% this Spring.

Look for others to follow.

Condo insurance has been under priced for quite some time now.
Deal Addict
Feb 7, 2006
2470 posts
1415 upvotes
RobertSmalls008 wrote: One of the top 5 insurers in Ontario is raising their condo insurance premiums an average of 13% this Spring.

Look for others to follow.

Condo insurance has been under priced for quite some time now.
Few more instances of people upset about sudden spikes in condo insurance:

1 - Did anyone else have their Tenant's Insurance increase 50% this year?

https://old.reddit.com/r/PersonalFinanc ... insurance/

2 - Skyrocketing condo insurance - is it better to forgo insurance?

https://old.reddit.com/r/PersonalFinanc ... better_to/
Sr. Member
Aug 27, 2012
648 posts
699 upvotes
Calgary
winner2000 wrote: Few more instances of people upset about sudden spikes in condo insurance:

1 - Did anyone else have their Tenant's Insurance increase 50% this year?

https://old.reddit.com/r/PersonalFinanc ... insurance/

2 - Skyrocketing condo insurance - is it better to forgo insurance?

https://old.reddit.com/r/PersonalFinanc ... better_to/
My tenant insurance went up by 35% this year in Calgary with belairdirect. I have tried calling and asking what was going on and was told this is across the board for everyone...
Banned
User avatar
May 21, 2019
199 posts
155 upvotes
This may also mean the days of Property Managers and Boards stealing from Home owners funds and doing shady deals are also coming to an end... atleast the easy money is gone.
Deal Expert
Feb 29, 2008
21738 posts
21353 upvotes
Tarrana & The Ri…
MagicPants wrote: This may also mean the days of Property Managers and Boards stealing from Home owners funds and doing shady deals are also coming to an end... atleast the easy money is gone.
I hope so.

Top