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.
Condo Insurance Premiums Are Spiking In Canada, Threatening Resale Prices
- Last Updated:
- Jun 16th, 2020 7:51 pm
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- SCORE+6
- choclover
- Deal Fanatic
- Oct 7, 2007
- 9404 posts
- 5374 upvotes
- choclover
- 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.
- StatsGuy
- Deal Guru
- Dec 20, 2018
- 10120 posts
- 10230 upvotes
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%
- RobertSmalls008
- Deal Addict
- Nov 2, 2014
- 1137 posts
- 450 upvotes
- Scarborough, ON
Among many other things here are 2 big factors which do not get enough play: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.
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.
- choclover
- Deal Fanatic
- Oct 7, 2007
- 9404 posts
- 5374 upvotes
Can you shed more light on this? I am not sure I understand what is driving such rates to go up.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.
- at1212b
- Deal Guru
- 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!
- winner2000 [OP]
- 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
https://old.reddit.com/r/PersonalFinanc ... sts_of_60/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
- choclover
- Deal Fanatic
- Oct 7, 2007
- 9404 posts
- 5374 upvotes
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.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/
- Piro21
- Deal Expert
- Nov 15, 2004
- 21783 posts
- 4903 upvotes
- Toronto
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/
- chenwaa123
- Deal Addict
- Nov 2, 2007
- 1424 posts
- 394 upvotes
- GVRD
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)
- choclover
- Deal Fanatic
- Oct 7, 2007
- 9404 posts
- 5374 upvotes
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.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)
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.
- chenwaa123
- Deal Addict
- Nov 2, 2007
- 1424 posts
- 394 upvotes
- GVRD
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.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, 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.
- johnnychi
- Deal Addict
- Jun 28, 2018
- 1031 posts
- 789 upvotes
- Toronto
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.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.
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
Dividends through quality companies Though I usually lose money with trades
- BlueSolstice
- Deal Addict
- Dec 4, 2016
- 2011 posts
- 1030 upvotes
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.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.
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.
- choclover
- 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.
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.
- RobertSmalls008
- 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.
Look for others to follow.
Condo insurance has been under priced for quite some time now.
- winner2000 [OP]
- Deal Addict
- Feb 7, 2006
- 2470 posts
- 1415 upvotes
Few more instances of people upset about sudden spikes in condo insurance: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.
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/
- pauliaK
- Sr. Member
- Aug 27, 2012
- 648 posts
- 699 upvotes
- Calgary
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...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/
- MagicPants
- Banned
- 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.
- JayLove06
- Deal Expert
- Feb 29, 2008
- 21738 posts
- 21353 upvotes
- Tarrana & The Ri…
I hope so.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.