It has come as a shock to many across B.C., but the recent price hikes in strata insurance premiums in Vancouver is rapidly making insurance unaffordable. With monthly rates more than doubling, and deductibles increasing by more than 300% in some cases, budgets that are already stretched thin are taking a hit. Understanding why strata premiums in Vancouver are increasing is the first step in making informed decisions for yourself and your fellow condo owners, to make sure you stay covered.
Why Are Vancouver’s Strata Insurance Premiums on the Rise?
Although these rate rises are being seen across the province, they are particularly worrisome in Vancouver where more than half of its residents live in strata-titled properties.
There are a number of reported reasons for their increase:
- Strata insurance valuations are based on recent appraisals. Owing to the increase in costs for construction, and the increase in property values over the past few years, the value of a building, and the cost to repair, have also dramatically increased. The cost of construction/repair in Vancouver has risen 7-15% in the last 12 months.
- Owing to the fact that strata insurance policies cover commercial-grade systems, such as your plumbing, boilers, heating, etc… strata buildings are insured with a commercial property insurance policy. These policies are generally more expensive, and also subject to fluctuations in construction and materials cost increases.
- Insurance companies need to maintain a ‘float’ to meet future claims and needs. The increases in property prices over the past few years, and the aging of buildings across Vancouver, has led to more claims, and at higher valuations.
- The local market is affected by global events. In order to keep strata insurance premiums in Vancouver lower, many insurers need to take out their own insurance. As these larger-scale insurance companies are now affected by global weather events such as fires, floods, and hurricanes, their costs are also increasing.Unfortunately, these costs are not only passed down to you- the strata owner- but they are also seeing the viability and liquidity of smaller insurers drying up. This leads to less competition within the market, as larger, national insurers become the only option for large scale insurance policies.
What Does This Mean for Your Strata Insurance Premiums?
In most cases, it means that your strata insurance premiums are going to be increased whenever the policy is due for renewal. It also means that if the deductible on the insurance premium increases dramatically, say to $100k, any damage under that value will have to be paid by the condo owners. Whereas traditionally the policy would cover these liabilities, or at least cover them with a lower owner contribution, as well.
Now, it is more likely that if your condo is damaged in some way, and it is localized (that is- it only affects you), you are now more likely to have to pay for repairs yourself. If that damage happens to also affect the common areas, you may also be liable to the whole repair amount, depending on the policy.
With this in mind, it is now more important than ever to take out your own condo homeowner insurance policy in Vancouver. This policy should cover your liability in the event of damage to your condo, as well as (at the least) the cost of the deductible of the strata policy, should you be found to be at fault in a claim.
I’m Looking at Buying a Condo in Vancouver- Should I Be Worried?
If you’re looking at entering the condo property market in Vancouver, or simply looking to move, there are a few things to consider when forming your budget. First and foremost, it is unlikely that these insurance premiums will see a reduction any time soon. Although the provincial government has confirmed they will review current legislation, it is unlikely these premiums will be reduced again, now or in the future.
Second, when looking for a condo, you need to take into account those things that typically affect strata insurance premiums in Vancouver. Questions like:
The age of the building, and likelihood that it will need repairs
Does the building have an active and regular maintenance program?
Is the building’s structural integrity intact?
Is there a depreciation report and does the building meet regulatory requirements?
Are the strata by-laws up to date, and have the tenants/owners been made aware of these changes?
Is there a history of claims, that are likely to see premiums increase?
Have the premiums been underpriced in the past, and is it likely the insurer will look to recover those costs, now that the property market has cooled a bit?
Just because strata insurance premiums in Vancouver are on the rise, doesn’t mean you should be scared out of the market. At the West Haven Group, we work for you. As industry experts, we can help you to navigate these changes and establish a budget and plan based on your circumstances. If you want more information, or need help find the home of your dreams without worrying about the future reach out and connect!