Co-ownership Insurance: When Professional Expertise Makes All the Difference
Co-ownership insurance is probably the least understood form of insurance among consumers. Unlike tenant insurance or traditional homeowners’ insurance, it relies on a two-policy structure: one policy held by the syndicate of co-owners and another held by the unit owner. In a market shaped by an aging real estate stock, increasing claims frequency, and an evolving legal framework, the advisor’s role has never been more strategic.
A Two-Tier Structure
According to the Insurance Bureau of Canada (IBC), nearly one in five condo owner is unaware that their unit is protected by two separate insurance policies. This lack of understanding often leads to coverage gaps, unrealistic expectations, and ultimately, confusion and friction when a loss occurs.
Salma El Maroizy, Director of the Regroupement des cabinets de courtage d’assurance du Québec (RCCAQ) and Vice-President, Personal Insurance at Fort Assurance, sums up the issue: “To be adequately protected, consumers must clearly understand both their own insurance policy and that of the syndicate of co-owners.”
The insurance policy of the syndicate covers the building, common areas, and the reconstruction of the unit based on a standardized definition, namely its original construction state, using baseline materials. Pierre Duchesne, Personal Insurance Advisor at Beneva, explains this key concept: “The insurance policy of the syndicate covers the unit as it was originally built. Any improvements or renovations made by the unit owner, however, fall under the owner’s personal insurance.”
For insurance professionals, a significant portion of the advisory work revolves around this distinction. In newer condominiums that have undergone few modifications, the difference in value between the standard unit and the actual unit may be negligible. In older buildings, however, where extensive upgrades may have been completed over the years, the gap can become substantial and costly in the event of a claim.
The Standard Unit: A Key Concept
The concept of a standard unit, also referred to as a reference unit, lies at the heart of condo insurance advice. Salma El Maroizy recommends discussing it from the outset with every new condominium owner: “Brokers must clearly explain this structure, assess the client’s specific needs, and guide the collection of the necessary information, including the year of construction, the definition of the standard unit, and the building’s characteristics.”
The amounts budgeted for improvements to private units are frequently underestimated, as are additional living expense. “Co-owners often believe they are adequately covered, when it is not always the case,” she notes. Here again, the advisory role of agents and brokers is critical in assessing needs and explaining coverage limitations, if applicable.
Pierre Duchesne notes that rising material costs have increased this risk: “The advisor’s role is crucial in adjusting coverage to reflect the condo’s actual characteristics. The goal is not so much to avoid over-insuring as it is to ensure an adequate minimum level of protection.”
Reading Between the Lines
Brokers and agents advising co-owners cannot ignore the policy of the syndicate or co-owners. They must guide clients toward the right documents to review and the right questions to ask.
Salma El Maroizy identifies three key elements to analyze when a client contacts you before purchasing a condo: fully understanding the definition of the standard unit, identifying modifications made to the unit, and reviewing the exclusions contained in the syndicate’s policy. “This information allows the client’s personal coverage to be adjusted to fill any potential gaps.”
Pierre Duchesne illustrates the risk posed by insufficient coverage on the syndicate’s side: “If a loss occurs and the syndicate has not purchased the necessary endorsement; the resulting costs could be shared among all unit owners.” Each co-owner may then have to rely on their personal insurer, provided their own policy includes the appropriate coverage. This can even create challenges for co-owners on upper floors, who may mistakenly believe they are not exposed to risks such as sewer backup or water damage. Without the proper endorsement, they may not be compensated.
Supporting Buyers Before the Purchase
Consumers are well advised to contact an insurer before purchasing a condominium. One of the most strategic moments for insurance professionals is therefore the period leading up to the acquisition. “The more information a buyer has about the building they intend to move into, the more accurate the insurance quote will be,” explains Carlos Melo, Technical Affairs and Insurance Information Centre at the IBC-Québec. He recommends reviewing the declaration of co-ownership (which includes the description of standard units and building by-laws), meeting minutes, the syndicate’s financial statements, and especially the contingency fund study and maintenance log. “It is not enough to look at the amount available in the fund. Buyers need to understand and anticipate upcoming work and the actual financial requirements. These are aspects that buyers often overlook, but that a professional can bring to their attention.”
Salma El Maroizy highlights another common pitfall: unusually low condo fees. “They may indicate underfunding or deferred maintenance, whereas higher fees may actually reflect prudent and responsible management.” For brokers and agents, helping clients interpret these indicators can also help them avoid purchasing a property that may be difficult or prohibitively expensive to insure.
Pierre Duchesne nevertheless points out the practical limitations faced by brokers and agents at this stage: “They generally do not have access to detailed information regarding the syndicate’s coverage, which falls under commercial insurance. Their role is instead to advise clients so they can choose protection that matches their needs.” They can, however, direct clients to the appropriate sources, such as the syndicate, notary, accredited appraiser, or building inspector, ensuring they have the information required to make informed insurance decisions.
Identifying Common Blind Spots
Several elements are regularly underestimated in condo insurance management and should be proactively addressed at every renewal.
One of the most common blind spots is additional living expense coverage. “An occupant may need to be relocated for several weeks or even months, depending on the severity of the loss. Costs can quickly become significant, sometimes exceeding $10,000,” notes Pierre Duchesne. Because insurers calculate basic limits differently, agents and brokers should take the opportunity to explain the full range of expenses that could arise following a loss. They should also help clients determine whether their current limits are sufficient for their situation.
The value of personal belongings is another blind spot. “Clients transitioning from a house to a condo often underestimate their needs,” he says. Unlike traditional home insurance, condo insurance requires a more precise assessment of personal belongings based on replacement value. He recommends taking a cautious approach by allowing for an additional margin of error: “The natural tendency is to undervalue,” especially since, under many traditional home insurance policies, personal property values are derived directly from the value of the dwelling itself.
Personal liability coverage is also undergoing a significant shift. Pierre Duchesne notes that the longstanding $1 million standard is increasingly being replaced by $2 million in coverage, particularly due to legal requirements applicable to buildings with more than 13 units. “If damage is caused to others, such as through a fire or major water loss affecting several units, the amounts involved can escalate rapidly. Yet the premium difference between the two coverage levels is relatively small, which is often a compelling argument for clients.”
Making it Accessible: An Essential Part of the Advisory Role
Condo insurance is inherently complex. Its two-policy structure, technical concepts such as standard units and unit improvements, and its interaction with condominium law make it a product that is not simply sold but advised. Salma El Maroizy stresses the importance of not waiting until the last minute to purchase or renew coverage. “Proper preparation helps prevent coverage gaps and ensures insurance is better aligned with the reality of the property.”
She concludes with a principle that should guide every recommendation: “Insurance should not be chosen solely based on price. It is essential to prioritize comprehensive protection that is tailored to the client’s situation.” For damage insurance professionals, this is precisely where their value lies and their strongest argument against online comparison tools.
This article was translated with the assistance of AI and carefully reviewed by human editors.
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