Get The Facts On Strata Insurance Replacement Costs
Consider yourself warned. The consequences of not being properly insured could be devastating. The fact is that stratas in BC are mandated to have current replacement cost insurance in place and if you don’t have it, then you could be liable. BC is an expensive place to live and as you can guess, construction costs keep rising in this province. It’s a fact that Vancouver construction costs are the highest in Canada. So, you may want to take a look at your strata insurance policy, as you could be one of the 70% of buildings that are under insured, in some cases up to 40%. That means if there is some form of disaster and it’s going to cost hundreds of thousands of dollars to replace, then it’s up to the owners to cover the rest. That’s why all strata corporations, regardless of size, must obtain property and liability insurance. Strata owners should also purchase for their needs and keep in mind that insurance for the strata corporation is not the same as strata homeowner or tenant insurance.
What are the laws? Who exactly is responsible and what happens if you’re building is not totally covered?
How it works is that the Strata Property Act mandates minimum insurance coverage for the collective interests of strata lot owners, but does not mandate insurance coverage for the personal interests of owners, landlords, tenants and occupants. The act and regulations set out minimum requirements for coverage and the establishment of value. And most strata will just do the minimum and cover themselves. It’s up to the strata corporations who must maintain full replacement value on all common property, common assets and fixtures of the strata corporation. This essentially requires the strata corporation to routinely obtain appraisals to estimate what the current cost of replacing the building and the fixtures would be in the event of damages or a loss.
Remember the fact about Vancouver constructions costs? For example, the hard construction cost for a Class A five-to-30 storey office building in Vancouver ranges from $270 to $340 per square foot.You don’t want to have to cover that, so get hold of an insurance appraisal company like Elliott Appraisals so they can advise you where you start with your insurance appraisal coverage.
In British Columbia, strata corporations must maintain full replacement value on all common property, common assets and fixtures of the strata corporation. This essentially requires the strata corporation to routinely obtain appraisals to estimate what the current cost of replacing the building and the fixtures would be in the event of damages or a loss. Get active and bring this up in your next strata meeting and ask, when the last time an insurance appraisal was completed by a professional. Tell them that it’s also good to get someone with local Vancouver insurance appraisal experience, as they will know the marketplace and things to consider when creating an accurate report. Thinking local is the smart way to go when it comes to the Fraser Valley and Metro Vancouver. Make sure in your next annual general meetings, review the adequacy of the strata corporation’s insurance policy annually and report on the insurance coverage.
The Times Are Changing
As you may have noticed the world is changing more and more; we are now seeing natural disasters that only decades were unthinkable. That means with the increasing number of worldwide natural and human disasters, insurance companies and investors are closely assessing the real costs of insurance and the impact of a major disaster on their portfolios and their reserves. That means it’s more and more important to have as much coverage as you can and plan for the unexpected.
One of the largest fault line in North America runs right through the coast and western part of the province. Have you ever thought of earthquake insurance? For British Columbia, the costly risks lie in the event of a major earthquake and for remote smaller communities, forest fires. In BC earthquake insurance is an option. It is not mandatory and every strata corporation makes decisions annually based on costs and coverage. Earthquake coverage is also set with a different formula for a deductible. If you live in a 50 unit apartment building, it may have an appraised insurance replacement value of $13 million. At current policy conditions, the deductible in the event of a loss and claim is 10 percent of the total replacement value. Unlike the water escape deductible or fire deductible at a fixed cost around $5,000 to $25,000 for most strata corporations, the earthquake deductible in this case would be $1.3 million. That converts into an average assessment owing by each unit at $26,000. Has anyone contemplated how this amount will be paid by each owner?
Let’s face it, no one can predict when or where the next major event will occur. Recent events however indicate British Columbian are not immune and therefore need to prepare and that starts the right insurance appraisal report so you are prepared. The best reactive plan to a crisis is the proactive plan put into place long before the event occurred.
There are several interests and conditions associated with insurance policies for strata corporations, all types of homeowners, landlords and tenants, leaseholders and commercial investors. The common property is the property that is not part of a strata lot and set out as common property on the registered strata plan and through the definitions set out in the act. Common assets will be those items such as lounge furniture, pool tables or lawn mowers and that’s about it. And according to the laws, strata corporations are obliged to insure for basic perils, such as fire, lightning, smoke, windstorm, hail, explosion, water escape, strikes, riots or civil commotion, impact by aircraft and vehicles, vandalism and malicious acts. They are also required to maintain a minimum of $2 million in liability insurance. If you think about it, in today’s Fraser Valley and Metro Vancouver housing costs and in some cases, depending on the damage that amount just won’t cover much. When even more problems come up is when strata corporations rely on other parties to place their insurance, they do not work directly with their broker and they do not understand the implication of exclusions.
Benefits to Obtain Replacement Cost Coverage
The best case scenario is that you want to be able to replace your property with all brand new construction without incurring any out-of-pocket expenses. Secondly, you want peace of mind that the work will be completed in a professional manner and to your standards. You know your property the best, so make sure that you get most everything back to the way it was. Keep in mind, that if you get the right insurance policy, replacement cost coverage can also cover temporary housing for a family.
If you think you need a Vancouver appraisal done on your property or you have a strata corporation, or you know someone who does, then it’s a good idea to contact an appraisal consultant who can walk you through the process. At Elliott Appraisals, for over 20 years we have been known as the experts in covering Metro Vancouver and the Fraser Valley. Our company specializes in Vancouver Insurance appraisals and building appraisals. Call us today at: 604 313 7598 and one of our fully accredited appraisers will talk to you and advise you on what are the best steps to take for your home. You can also fill our contact form. Every home, strata and situation is different and Elliott Appraisals will be able to guide you through the process of completing the report successfully, professionally and on time.