Student Apartments, Residences, Housing, etc. – NOT Apartments!

Any property investor or LENDER in the Province of Ontario, CANADA who has an equity or financial interest in student accommodations should take special care when purchasing, renewing or accepting as collateral an insurance policy – insurance companies do NOT like to insure any properties with multiple students living in any unit.  Many insurance companies decline the class of business so that anyone who is selling insurance through those companies may not be insuring you, whether you hold an insurance policy or not!

If you are reading this and own or lend on student housing where the insurance policy does not identify as such, e.g. shows as “apartment building” on your policy – do yourself a huge favour and ask to have the policy amended by the insurance company – not just the agent/broker.

Some commercial realtors are not yet realizing the predicament in which this places an investor – buyer or seller (and also the realtor) – if you own any of the many student apartments being advertised as such.  And many insurance salespeople are also not aware of the consequences to the client, the firm (brokerage or agency) or the insurance company if written as an apartment building and a claim occurs.  If declined by an insurance company for “material misrepresentation”, our whole industry is tarnished by your oversight and I, for one, do not appreciate hearing of another insurance company claim that was not paid, legitimately or otherwise.

Insurance companies on both sides of the border do not like multiple tenanted risks – “rooming houses” by definition – and most of these student apartments have 5 in each unit; well, how can anyone describe this occupancy in any other terms?  If you don’t wish to take my word for it, please do some research and you will quickly learn and agree with me.

Many of you (I have to take each of you at your word when I hear that Aviva, Economical, etc. are insuring you) have an insurance policy that may not respond to a claim in the event of a loss – property or liability – because the insurance company will not insure “student residences”!  Yes, this is common knowledge among the insurance community so anyone who is insuring as an apartment building had better be extremely careful in dealing with you; do NOT rely on their written evidence that you have an insurance policy but insist on the insurance company showing on the policy or verifying in writing that you have students occupying the property.  There are acceptable insurance markets for this category of risk – Lloyd’s being one, Zurich (yes, we have access for fire-resistant structures through this carrier) and, possibly, others through “subscription” or wholesale facilities.

I specailize in working with investors, lenders and property managers so why not just contact me for advice and assistance to ensure that you do not face the terrible consequences of having an insurance policy but not really having insurance?  I have an appointment this week with someone who thought State Farm still wrote student apartments until they contacted the company to determine otherwise (after I encouraged them to obtain written verification that they do have coverage).

And one final note: ask your insurance professional to explain cancellation when done “ab initio” – it means that you were cancelled as if there never was any insurance policy written.  I am sure that you do not wish for that to happen to you!

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