Does Strata Cover Building Insurance?

Strata building insurance covers the building, common area contents, loss of rent/temporary accommodation, and public liability (of common areas). Committees should always ensure there’s coverage for personal accident/voluntary works, legal defence expenses, fidelity, and office bearers’ liability.

Other potential insurance options that may be applicable to your owners corporation:

  • Floating floorboards
  • Catastrophe insurance
  • Machinery breakdown i.e. lifts, escalators, motorised gates and doors, sump pumps, air conditioner motors over 5kW, fusion for large motors, other electrical and mechanical machinery, pressure vessels, boilers, and other plant and electrical/motorised equipment.
  • Flood
  • Government audit costs
  • Lot owners’ fixtures/improvements
  • Fusion of electric motors
  • Burst pipes – exploratory/reinstatement costs, repairing or replacement parts, contamination/pollution rectification costs.
  • Asbestos related
  • Water damage/burst pipes
  • Potentially other coverage that may be applicable to your particular building / owners corporations.

Strata building insurance is taken out and paid for by the owners corporation. All owners in the owners corporation contribute to the cost of insurance policy through their OC levies. Owners corporation levies in Victoria are based on each owner’s lot liability.  Owners can make an insurance claim through their owners corporation manager for items and matter coved by the strata building insurance.

What Does Strata Building Insurance Typically Cover?

Strata building insurance typically covers:

      • Structural elements – foundations, floors, load-bearing structures, walls, ceilings.
      • Exterior elements – balconies, windows (external, including frames)
      • Roofing – roof terraces, roofs, guttering.
      • Share services – electrical wiring, plumbing systems, heating, ventilation, and air conditioning systems.
      • Common areas – entrances corridors, lobbies, stairwells.
      • Shared facilities – gyms, swimming pools, tennis courts, BBQ and common residents areas.
      • Fixtures – fixed appliances, built-in fixtures, cabinets, cupboards.
      • Internal Elements (in common areas) – common walls between lots, shared utility rooms.
      • Public Liability – legal liability coverage for injuries or damage on common property.

    Strata building insurance covers the insurable building which is defined in Division 6 of the Owners Corporations Act 2006:

      • The building – anything prescribed as forming part of a building
      • Share services – includes any pipes or cables providing services to the building including water, electricity, gas, and telecommunications.

Strata insurance will typically cover the owners corporation for incidents such as:

  • Bodily injury on common property
  • Property damage by third parties to common property
  • Legal defence costs when the owners corporation is party to a legal matter
  • Fidelity cover where funds are misappropriated by an owner or Committee Member or the owners corporation manager
  • Officer bearer’s liability where a Committee does something that causes damage or loss to the owners corporation.

What Strata Building Insurance Doesn’t Cover

Strata building insurance typically does not cover:

  • Carpets and temporary floor, wall, and ceiling coverings
  • Fixtures removeable by a lessee at the end of a lease
  • Anything prescribed not forming part of a building

Additionally, renovations and alternations by individual owners are generally not covered and unapproved structural changes are not covered.

The Role of the Owners Corporation

The owners corporation, owners corporation manager, and insurance broker jointly manage, maintain, and negotiates the strata insurance policy. When claims arises these parties should together to firstly ascertain whether or not it should be a claim under the strata insurance policy.

The funding of a building’s insurance premiums should ideally have been appropriately budgeted for at the start of the financial year and with levies collected accordingly. Though there buildings where the insurance premium is funded by a third party financing entity.

Individual Owner Responsibilities

The personal belongings of owners and tenants are not covered by the strata building insurance.

Owners corporations and Committee should speak to their owners corporation manager and insurance broker about ensuring that improvements to the building are covered by their insurance policy.

How to Make an insurance Claim

Insurance claims are lodged and managed by the owners corporation manager in conjunction with the insurance broker.

Where an owners corporation does not have a professional OC manager in place (i.e. ‘self-managed’ OC) then the lodgment and management of insurance claims would fall to the owners and the volunteer manager of the OC.

Reviewing and Updating Insurance Policies

Insurance coverage should be reviewed and updated at appropriate periodic intervals to ensure that the owners corporation is protected from any insurance liabilities.

Insurance advice should always be sought from insurance professional and the right expert insurance brokers.

 

Conclusion

In Victoria, there are legal requirements around owners corporation insurance – namely relating to the replacement value and minimum public liability required. Strata building insurance as with all insurances is vital for risk mitigation; therefore it is important that all owners corporation review and paid careful attention to their strata building insurance.

 

The contents of this article or website are only intended to provide a general overview of the topics discussed. The author of this article makes no representations as to the accuracy or completeness of any information and the information is not intended to constitute investment, legal or professional advice. You should seek professional advice before acting or relying on any of the content. This article does not contain references to any specific company, organisation or individual, unless expressly specified.
Posted
November 23, 2023
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