Townhouse Condominium vs. Apartment Condominium Insurance Coverage: The same but different

A comparison of the insurance policies of an apartment-style condominium and that of a townhouse condominium community, you would see they are very much the same.  Each will include the coverages that the Condo Act requires a condominium corporation to maintain.  

You will have to take a closer look to see the differences between the policies and will find these on the declaration pages of the respective policies.  Items that are applicable to the property section of the policy are listed first on the declaration pages, such as the type of coverage form and basis for settlement of a claim are noted.  We want to see an All Perils coverage form and Replacement Cost basis identified here.  In this section of coverage, we are also looking for the limit of insurance available and the rate (premium per $100 of replacement cost) at which the insurer is providing the coverage.  The rate for townhouse condominiums will typically be higher than that of an apartment condominium due to the frame vs. fire resistive construction of the buildings.  Apartment condominiums are typically larger and the limit higher.  

An apartment building may have contents listed separately from the building limit. Common area furniture such as fitness equipment, art and office furniture are included in the contents limit of property coverage.  Townhouse communities will have this separate line of coverage much less often as it only applies to items not permanently affixed to the buildings themselves.

Water damage claims will go against the property coverage on a corporation’s policy and depending on the claims frequency and cost of repairs, the deductible is subject to change. Water losses in a stacked-housing environment tend to have higher payouts (due to water travelling through multiple units) and therefore apartment buildings often have higher water damage deductibles in place.  

Rental units belonging to the condominium corporation are a source of income for the corporation.  Rental income coverage for the annual gross rental value of the suite will recoup any lost rents should there be an insurable loss causing difficulty in leasing out the unit.

It is often argued that a townhouse condominium does not require boiler and machinery coverage.  Regardless of the construction of a property, there are computerized pieces of equipment and/or electrical services within the property.   A sudden and accidental failure of a motor or piece of electrical equipment can activate this coverage and repair the damaged equipment and resulting property damage.  This coverage often has the ability to pay expediting expenses to get an essential piece of equipment operating and back to pre-loss condition in as little time as possible.  

Regardless of the type of construction, a condominium corporation is required to maintain a safe and hazard free environment at all times.  Should the corporation have employees, specific liability coverage is required beyond the general liability. Many apartment building condominiums employ onsite maintenance or management staff and should have Employer’s Liability coverage in place.  If an employee was to claim they have sustained an injury while completing their job-related tasks, it may trigger this coverage to defend the corporation and/or pay compensatory damages to the employee.  The larger the corporation, the higher the number of residents and guests coming and going at any given time, the higher the potential for bodily injury or property damage.  General liability limits will be higher where severity and frequency of claims can be higher.  This reasoning is also applicable to the directors & officers liability limit of coverage because the financial impact of alleged mistakes made by a board of directors can result in higher costs.

There are many similarities when comparing a townhouse insurance policy to that of an apartment condominium, but just as every condominium corporation is unique, the same goes for their insurance policy.  As with any contract obtained by the Board on behalf of the corporation, a thorough review of the necessary coverage and discussion of appropriate limits with a knowledgeable condominium insurance broker is ideal.

THINGS TO CONSIDER FOR TOWNHOUSE:

LINE OF COVERAGE – Property:

All perils coverage to include sewer backup, flood and earthquake Replacement cost determined by third party appraisal Limit to include all items in Schedule H of the declaration Rate (per $100 of replacement cost) typically higher
Water damage deductible often lower

LINE OF COVERAGE - Boiler & Machinery:

If Schedule H and/or standard unit bylaw includes pool pump, sump pumps, electrical panels, transformers, computer systems, etc.
Full property replacement cost limit recommended

LINE OF COVERAGE – Liability:

Employer's liability if corporation maintains staff
Tenant's legal liability for renting offsite space for meetings, etc.

LINE OF COVERAGE – Directors & Officers Liability:

Higher ratio of rented units to owner occupied units will increase this premium

LINE OF COVERAGE - Cyber & Privacy Liability:

Directors' use of personal devices to communicate information specific to the business of the corporation
Corporation operates a website

LINE OF COVERAGE - Legal & Human Rights Defence:

Legal expenses outside of an insurance claim

LINE OF COVERAGE - Crime (Fidelity):

Employee dishonesty, theft or fraud

THINGS TO CONSIDER FOR APARTMENT:

LINE OF COVERAGE – Property:

All perils coverage to include sewer backup, flood and earthquake
Replacement cost determined by third party appraisal
Limit to include all items in Schedule H of the declaration
Rate (per $100 of replacement cost) typically lower
Corporation-owned contents such as laundry machines, common area furniture & art, office furniture, etc.
Rental income for corporation-owned unit(s) Water damage deductible often higher

LINE OF COVERAGE - Boiler & Machinery:

If standard unit by-law and/or Schedule H includes mechanical or electrical equipment like an HVAC system, boiler, generator, transformer, computer systems, etc.
Full property replacement cost limit recommended

LINE OF COVERAGE – Liability:

Employer's liability if corporation maintains staff
Tenant's legal liability for renting offsite space for meetings, etc.
Higher limits in place for larger buildings when frequency and severity of claims can be higher

LINE OF COVERAGE – Directors & Officers Liability:

Higher ratio of rented units to owner occupied units will increase this premium
Higher limits in place for larger buildings when frequency and severity of claims can be higher

LINE OF COVERAGE – Cyber & Privacy Liability

Directors' use of personal devices to communicate information specific to the business of the corporation
Corporation operates a website

LINE OF COVERAGE – Legal & Human Rights Defence:

Legal expenses outside of an insurance claim

LINE OF COVERAGE – Crime (Fidelity):

Employee dishonesty, theft or fraud.

Tricia Baratta, AJ Gallagher Insurance Brokers