Condo insurance basics, what you need to know

How much attention do you really pay to the condo insurance policy that will protect your property and contents? Before you start looking at insurance providers, you need to decide whether you’ll use a broker (works with multiple insurers), an agent (represents a single insurer), or a direct writer (supports one insurer online or by phone). Ask family, friends and neighbours if they’re happy with their insurers, and research consumer reports, but always take responsibility and do your own due diligence.

Most consumers are price-oriented, but as with most products and services, you get what you pay for, so once you’ve got the quotes, be sure you’re comparing apples to apples. To fully understand why one policy costs $85 or $523.18 less than another one, you will need to pay attention to all of the details and fine print pertaining to coverage, limits, exclusions and more.

A few key points to consider:

1. Guaranteed replacement cost (what it would cost to replace contents at today’s prices) or actual cash value (what you originally paid less the year-to-year depreciation because everything from a sofa to flooring will decrease in value over time). Of course, guaranteed replacement cost is infinitely preferable, but it costs more.

2. Named perils (which lists the perils covered, typically fire, weather, theft) or an all-risk policy (which lists only the perils not covered such as war or nuclear hazards). All-risk is best but again, the cost is higher.

3. How much is enough? Most insurers use a formula or industry calculator, generally tied to square footage, to determine the cost to replace a structure, detached structures (e.g. garage, shed) and contents. If your home has an unusual number of 4K flat screen TVs or high-end leather, goose down stuffed sofas, original artwork or jewellery, discuss it with your representative and be prepared to pay a higher premium for more coverage. Even if your furniture and contents are low-end to mid-range, you might be surprised at just how much it would cost to replace every single item you own if you crunch the numbers: sofas, chairs, end tables, dining tables, mattresses, beds, duvets, sheets, towels, small and large appliances, dishes, pots, pans, cutlery and much more. Insuring for less than the guaranteed replacement cost may save you money over the years, but is it worth the risk if your home and everything in it is destroyed?

4. Deductible — $500? $1,000? More? “A thousand dollars might not seem like a lot on a $30,000 repair, but for some families, that might be a lot all at once, so it might be worth the extra you’d pay annually to drop the deductible to $500,” says Pete Karageorgos, director, Consumer & Industry Relations, Ontario, Insurance Bureau of Canada.

5. Policy exit strategies. If your circumstances change, for example, if you decide to rent your primary residence for four months while travelling or on a work contract, you can generally change insurance providers at any time.

6. Reassess your policy and provider annually. If the price to renew has increased, find out why. Replacement costs likely rise year over year as labour and material are more expensive. If you’ve made changes to your home or contents, inform your provider to ensure your coverage remains adequate.