Is Condo Insurance Mandatory in Ontario for Owners?

You have just bought a condo, or you are about to, and someone has asked whether you have your own insurance. You already pay monthly common expenses, so it is fair to wonder why a second policy is needed and whether anyone can make you buy one.

The short answer is that the source of the requirement matters more than the label. This article explains where an obligation to insure can come from, what the corporation's own insurance leaves out, and what to check before you decide.

Does the law itself make owner insurance mandatory?

The Condominium Authority of Ontario advises owners to take out their own property insurance, including cover for unit upgrades, personal belongings and non-standard parts of the unit. That is advice, and the CAO also notes that governing documents may require it.

In other words, the strongest requirement is usually found in your building's own documents rather than in a blanket rule that applies to every owner. Whether a general statutory requirement applies to you is something a lawyer can confirm. Either way, going without a policy leaves real gaps, as the next sections explain.

Where a requirement can come from

Think of three places to look. Each one is a separate document, and you may be bound by more than one.

If you have a mortgage, do not assume the lender is satisfied by the corporation's policy. Read the mortgage terms and ask your lender directly what proof of insurance it wants.

What the corporation's insurance does not cover

Condo corporations must maintain insurance and keep their policies from lapsing. That includes insurance against damage to units and common elements, against liability for breach of the duty to keep common areas safe, and for directors and officers.

The corporation's property insurance does not cover improvements or non-standard elements of units. Anything outside the standard unit definition is an improvement, and the owner is responsible for insuring and repairing it. Your governing documents define the standard unit, and those definitions generally exclude alterations or renovations.

As a general guide, walls, doors and plumbing are usually part of the standard unit, appliances and flooring are usually owner improvements, and fixtures, furnishings and personal property are usually not part of a standard unit. Your own building's definition is what counts, so confirm it in your documents.

What can happen if you go without a policy

There may be no single penalty for skipping insurance. The risk is that you absorb the cost yourself. If a flood damages your new flooring or your upgraded kitchen, the corporation's policy generally does not pay for those improvements.

• Your belongings are not part of the standard unit, so they are generally not covered by the corporation.
• Owners are generally responsible for their own deductibles unless they or their guests damage common elements through direct action or negligence.
• Deductibles can range from a few hundred dollars to tens of thousands.
• By-laws can extend owner responsibility for the corporation's deductible, including where no one is at fault.

If a by-law or declaration requires insurance and you do not have it, you may also be in breach of your building's rules. What follows from that depends on the document and the facts, so a lawyer can advise on your situation.

What to do next

• Ask the corporation for the declaration, by-laws and the standard unit definition, and read any insurance clauses.
• Check your mortgage documents for insurance conditions and ask your lender what proof it needs.
• List the upgrades and non-standard features in your unit so you know what you would be insuring.
• Ask an insurance broker to explain how a policy would respond to improvements, belongings and any deductible charged back to you.
• Keep your policy documents with your closing papers.

If your documents are unclear or the corporation is demanding something you do not think the rules support, speak with a lawyer who handles condominium matters.

Frequently asked questions