Are You (Unintentionally) Double-insuring Your Condo?

Today’s topic is for condo owners, especially those of you who have purchased your properties using a bank loan. Did you know you could be unintentionally wasting money double-insuring your property?

See, as part of your loan agreement with the bank, you are required to ensure that your property is suitably insured for fire. Why? Technically, it’s because the bank is the real owner of the property while it is on loan. You are servicing the mortgage and only once completed is the property yours. The bank wants you to take care of it to maintain its value (in case it has to take back ownership for whatever reason).

So what commonly happens is your lending bank will insure the property for you (using their insurance providers) and charge you for it each year. You can check your mortgage statement to see if charges for fire insurance are there.

Where’s the problem then you ask? Isn’t it important to have your property insured?

Well, assuming you’ve received your keys and taken ownership of the condo unit, your condo would likely be managed by a condo management company (MC) or a joint management body (JMB). Part of their responsibility is to ensure that the building is insured, including against fire. They usually take one huge policy out on the whole building and then split the insurance premiums among all the individual property owners. You can check this out on your service and maintenance charge statements (or ask your condo management).

It’s important to note that the condo management insurance (your portion) is usually significantly cheaper than the policy your bank would give you. We’re talking potentially as low as 15% of the cost.

If you are unsure, I recommend you check your statements to make sure you’re not wasting your hard-earned money. If you do find that you are double-insuring, here’s what to do.

1. First, get a copy of your fire insurance certificate from your condo management. You’ll have to make sure your management fees are paid.
2. Then, contact your bank and request a refund of the bank’s fire insurance charge.
3. Ask them where to send your documents or if any forms are necessary. One common method is to email them the copy of your insurance certificate.

On a side note, this is a fairly common thing that banks process, so don’t worry about the bank complaining or disputing. At the end of the day they just want to make sure the property is safe.

For owners who have already fully paid off their properties, it is also good to check if you are buying fire insurance separately on your condo unit. Perhaps you’ve just continued to pay the insurance from long ago. If you are indeed getting your own policy, check with your condo management to see if they have a whole-building policy and whether you are double-insuring or not.

Finally, for those of you wondering why these things happen in the first place: the bank does not know if the condo is truly fire-insured, nor does it dedicate resources to check every condo individually. It is much safer (from their point of view) to just insure your property first and then leave the onus of proving the condo is insured to you.