Is Condo Insurance Mandatory in Ontario? What the Law Requires

If you are buying a condo, you may be told you must have insurance, and it is not always clear who is saying so or why. The answer depends on where the requirement comes from: the law, your building's documents, a lease or your mortgage lender.

This article separates those sources so you know what is actually binding on you, and what is simply sensible protection.

What the law itself says

The Condominium Authority of Ontario does not cite any statute requiring unit owners to carry their own insurance. It does say owners should strongly consider it, covering upgrades, fixtures, furnishings, equipment and personal property, and possibly legal expense insurance.

By contrast, the corporation itself must carry insurance and never let it lapse. That is the corporation's duty, not yours.

The corporation's coverage must include damage to units and common elements (s. 99), liability for failing to keep common areas safe or from using machinery (s. 102), and directors' and officers' liability (s. 39). The directors' and officers' insurance does not cover directors who do not act in good faith.

When your building's documents make it mandatory

A corporation's declaration, by-laws or rules may require owners to carry insurance, and then it is mandatory for that building. Ontario condos are governed in this order: the Condo Act, then the declaration, then the by-laws, then the rules. If they conflict, the Act takes priority.

Because the requirement can sit in any of those documents, read all of them, not just the declaration. A by-law or rule can be changed over time. Amending the declaration needs written consent from 80 to 90 per cent of owners, depending on the change, while a by-law change is passed by the board and then voted on at an owners' meeting, where most changes need majority approval. The board can make or change rules after notifying owners, and a rule takes effect unless owners request a meeting to challenge it before its effective date.

Tenants, lenders and other sources

• Tenants of condo units are not legally required to carry tenant insurance, unless the tenancy agreement or the corporation's governing documents require it.
• Lenders: a mortgage lender may set its own insurance conditions in your mortgage terms. The rules above do not address this, so check your mortgage documents and ask your lender.
• Landlords: if you rent out your unit, your lease and the governing documents may set insurance expectations for your tenant.

In short, even where the law does not force you to buy a policy, a document you have signed or agreed to be bound by might.

Why many owners carry it anyway

The corporation's property insurance does not cover improvements or non-standard elements of units, and fixtures, furnishings and personal property are generally outside a standard unit. Owners must repair everything outside the standard unit definition, however the damage was caused. Each corporation defines the standard unit in its own governing documents, so the line can fall differently from one building to the next.

There is also the deductible. The corporation can charge an owner the lesser of the repair cost or its deductible where an owner, tenant or resident causes damage. Some by-laws make owners pay the deductible in more situations, even where no one is directly at fault, and deductibles can range from a few hundred dollars to tens of thousands. Without your own coverage, those costs fall on you.

A chargeback is a cost the corporation bills to one owner, usually because of that owner's act or omission, and it is separate from your regular monthly fees. If an owner cannot pay chargebacks added to their condo fees and no solution is reached, the corporation automatically has a lien against the unit for that debt.

What to do next

If you are buying resale, a status certificate can help. It may include certificates of insurance, and whatever it includes or leaves out binds the corporation. It must be provided within 10 days.

• Read the declaration, by-laws and rules for any insurance requirement.
• Ask for the status certificate and review the insurance information in it.
• Check your mortgage terms and ask your lender about insurance conditions.
• If you are a tenant, read your tenancy agreement for an insurance clause.
• Ask an insurer about contents, improvements and deductible coverage for your building.
• Have a lawyer review the documents if anything is unclear before you close.

Frequently asked questions