Key Takeaways:
- Strata building insurance in Melbourne generally covers the building structure, common property, public liability, and shared services managed by the owners corporation.
- Owners corporation insurance does not usually cover personal belongings, temporary floor coverings, or unapproved renovations inside a lot.
- Melbourne owners corporations are legally required to hold certain insurance under the Owners Corporations Act 2006.
- Insurance policies should be reviewed regularly with your owners corporation manager and broker to ensure adequate and compliant cover.
If you own a lot in a strata property, you might assume the building insurance is fully sorted. It’s a fair assumption, but it’s not the full picture. Getting this wrong can leave owners personally exposed to costs they didn’t expect.
At Strata Management Consultants, we regularly speak with Committees and lot owners who believe strata insurance covers everything within their property. In reality, owners corporation building insurance mainly protects the building structure and shared property, while individual owners may still need their own contents or landlord insurance depending on their situation.
In Melbourne, owners corporations are legally required to hold certain insurance policies under the Owners Corporations Act 2006. Below, we break down exactly what’s covered, what’s not, and what you should arrange on your own.
What is strata building insurance?
Strata building insurance, also known as owners corporation insurance, is a policy arranged and paid for by the owners corporation on behalf of all lot owners. If you’re paying levies, you’re already contributing to this policy, with each owner’s share generally based on lot liability.
Under Victorian legislation, most owners corporations are required to insure the building and common property. The requirements can vary depending on the type and size of the owners corporation, so it’s worth understanding where your scheme fits.
What does owners corporation insurance typically cover?
Owners corporation building insurance commonly covers the building itself and areas shared by residents. Under the Owners Corporations Act 2006, an “insurable building” includes the building, improvements and fixtures, and shared services such as water, electricity, gas, and telecommunications infrastructure.
With that in mind, typical inclusions may include:
- Structural walls, floors, ceilings, and roofing
- Balconies and external windows
- Shared plumbing, electrical wiring, and utility services
- Common areas such as foyers, lifts, stairwells, and corridors
- Shared facilities including gyms, pools, and BBQ areas
- Built-in fixtures and cabinetry
- Public liability for incidents on common property
- Legal defence costs relating to owners corporation matters
- Fidelity cover for misappropriation of owners corporation funds
- Office bearers’ liability relating to Committee decisions
Depending on the building and insurer, additional cover may also be available. These are worth asking your insurer or strata manager about:
- Machinery breakdowns
- Flood damage
- Burst pipes and water damage
- Catastrophe insurance
- Asbestos-related risks
- Government audit costs
- Lot owner improvements and fixtures
- Motor fusion for mechanical equipment
Because every property is different, it’s worth reviewing your policy carefully to confirm what is and isn’t included.
What is not usually covered by strata insurance?
Many lot owners are surprised to learn that strata building insurance does not automatically cover everything inside their apartment or townhouse. The Owners Corporations Act 2006 specifically excludes items like carpets, temporary coverings, and removable fixtures installed by tenants from the definition of the insured building.
Generally, owners corporation insurance does not cover:
- Personal belongings and furniture
- Carpets and temporary floor coverings
- Removable fixtures installed by tenants
- Unapproved renovations or alterations
- Damage to contents inside a lot
- Landlord-related risks for leased properties
This means there are gaps that owners need to fill themselves. Depending on your situation, you may still need:
- Contents insurance
- Landlord insurance
- Additional cover for renovations or upgrades
If you’ve completed significant works or improvements within your lot, make sure to notify the owners corporation manager and insurer. Without that notification, there’s a risk those improvements won’t be covered if something goes wrong.
Who manages the insurance policy?
Under the Owners Corporations Act 2006, the owners corporation is responsible for taking out and maintaining the building insurance policy. In practice, this is rarely handled by one party alone. It typically involves collaboration between:
- The owners corporation
- The Committee
- The owners corporation manager
- The insurance broker
Together, these parties review coverage, assess claims, and manage renewals. The owners corporation manager often plays a central coordinating role, making sure nothing falls through the gaps between policy periods or during the claims process.
Some Committees only discover gaps in their insurance processes after a major claim. Speaking with an experienced owners corporation Consultant early can help avoid unnecessary disputes.
How are insurance premiums funded?
Insurance premiums are generally funded through owners corporation levies collected from lot owners. Victorian legislation allows owners corporations to levy fees for insurance costs and ongoing obligations.
The amount each owner contributes is shaped by a few key factors:
- Lot liability is the proportional share assigned to each lot, and it’s the main factor that determines what you pay.
- Building valuation affects the total premium, and an outdated valuation can lead to underinsurance that puts all owners at risk.
- Claims history can shift over time. Frequent or large claims can push premiums up for everyone, which is why proactive maintenance matters at a Committee level.
The owners corporation must obtain updated building valuations periodically to ensure the building remains adequately insured.
How do insurance claims work in strata?
Insurance claims are usually lodged and managed by the owners corporation manager together with the insurance broker. While every claim is different, the process typically follows these steps:
- Reporting the incident
- Checking whether the damage falls within the policy’s coverage
- Arranging inspections or quotes
- Lodging the claim with the insurer
- Coordinating repairs or remediation
Claims can take time, particularly where damage affects multiple lots or crosses the boundary between common property and individual lots. In these cases, clear communication between all parties is essential to avoid delays or disputes over responsibility.
For self-managed owners corporations, these responsibilities usually fall to the volunteer manager or Committee, which can be a significant workload on top of everything else they handle.
Why regular insurance reviews matter
What was adequate coverage a few years ago may not hold up today. Construction costs rise, weather patterns shift, compliance requirements evolve, and claims trends change. Without regular reviews, these shifts can quietly create gaps that only become obvious when something goes wrong.
A thorough insurance review can help identify issues like underinsurance, outdated building valuations, and coverage gaps that no longer reflect the property’s current condition. It’s also an opportunity to check for unnecessary exclusions and make sure any changes to common property assets are properly accounted for.
At Strata Management Consultants, we regularly assist Committees reviewing their insurance arrangements, especially during management transitions where there’s a fresh opportunity to make sure everything is in order.
Need support reviewing your strata insurance processes?
Insurance management is one of the most important operational responsibilities within an owners corporation. The right advice and administration can make a significant difference when claims arise or policies need updating.
If your Committee is considering changing owners corporation managers, our Consultants can help guide the transition process.
