In a condo, building insurance is a major issue for protecting both the property and its co-owners. In the event of a loss, adequate coverage ensures that the building can be rebuilt without placing a heavy financial burden on residents. This is where the concept of insurable value becomes essential. Stay with us as we explore what insurable value means, alongside Sébastien Jean, É.A., Adm.A., President of the real estate appraisal firm CAP Immobilier.

The insurable value of a condominium refers to the amount on which the building’s insurance coverage is based—essentially, the amount required to replace or rebuild the property, whether partially or entirely, in the event of a loss. It represents an estimate of the replacement cost of the building, without taking into account its market value. This concept is crucial to ensuring adequate protection for the building while avoiding underinsurance or overinsurance.

In concrete terms, the insurable value corresponds to the amount for which the building must be insured, generally based on its full reconstruction cost. This value is determined through a professional appraisal conducted by a certified appraiser—specifically, a member of the Ordre des évaluateurs agréés du Québec (OEAQ). This estimate must be updated every five years to reflect current reconstruction costs, notably due to inflation and the rising price of materials and labor.

The appraiser must consider several elements:

• Condominium documentation: The analysis begins with the building’s original plans and specifications, the description of typical units, the building handover report, and any inspection reports.
• Detailed site visit report: During an on-site visit, an inspector performs a detailed assessment of all visible components of the building. Based on these observations, the appraiser can determine the building’s replacement cost.

It is also essential to distinguish between insurable value and the market value of a property. While the insurable value focuses strictly on reconstruction costs and excludes land value (since land cannot be destroyed), market value is the price a property can sell for on the open market, influenced by location, demand, and numerous economic factors.

An improperly insured building can lead to significant financial consequences for co-owners in the event of a loss. If the insurable value is underestimated, compensation may be insufficient to rebuild the property as it was. Conversely, an overestimation can result in unnecessarily high insurance premiums—an avoidable expense.

Condominium insurance generally covers the common areas (building structure, roof, elevators, etc.), while co-owners must obtain individual insurance to protect their unit and any improvements made to their private space.

In the event of a loss, the insurance company will compensate based on the established insurable value. An accurate appraisal is therefore essential to avoid financial losses and ensure proper reconstruction of the building.

The insurable value of a condominium is an estimate of the building’s reconstruction cost, distinct from its market value, and its regular reassessment is essential to maintaining adequate coverage. Rely on our specialists and condominium partners to simplify the management of your condominium and ensure you receive the right services every step of the way!