What is an Owner’s Corporation / Strata insurance?
Residential Owner’s Corporation / Strata insurance (previously known as body corporate) is general insurance that covers common property under the management of a strata title or body corporate entity.
This can be properties that are managed by body corporate manager or self-managed for smaller unit blocks (usually 10 lots or less that don’t need body corporate manager). Owners of each unit title typically share the premium costs of strata building insurance as part of their strata insurance premium and liabilities.
Holding a compliant & appropriate insurance is MANDATORY under each state’s legislation.
What does the compliant insurance cover?
The Owner’s Corporation insurance generally covers common or shared property as defined on the title of the property. This might include common areas, lifts, pools, car parks, gardens, wiring, balconies, walls, windows, ceilings and floors. The insurance must provide liability cover in the event people are injured on common property. Typically, it covers the following in additional to the building and public liability:
- office bearers’ legal liability
- voluntary workers insurance (a form of personal accident cover) •
- fidelity guarantee
- machinery breakdown
- catastrophe insurance
- lot owners’ improvements to the building
- legal defence expenses
- government audit costs
- appeal expenses
- Common property contents (for items such as carpet and paintings in foyers).
What is the minimum required insurance to be compliant under Owners Corporation Act 2006?
The minimum insurance required for owner’s corporation is:
- Reinstatement and Replacement insurance for all buildings in the common property
- the cost necessary to replace, repair or rebuild the property to a condition substantially the same, but not better or more extensive than its condition when new; and
- the payment of expenses necessarily and reasonably incurred in the removal of debris and the remuneration of architects and other persons whose services are necessary, being incidental to the replacement, repair or rebuilding of the damaged property.
- Public liability insurance for the common property. The Insurance covers for any liability of the owners corporation to protects owners in the case of unexpected damage and injuries.
- Minimum of $10,000,000 any one claim and in the aggregate during the insurance period.
We recommend that the owners or owners corporation committee to contact Insure Risk to obtain the appropriate compliant policy for their buildings insurance.
How can I check if my property is part of Owner’s Corporation or Strata Titled unit?
Please check with your Conveyancer, legal representative or property lawyer. You can also check the Section 32 when you purchase your properties. Your property is a Strata titled or an owner’s corporation unit when:
- Under Register Search Statement – you can see the land description – it usually states the lot number and it is on plan subdivision number.
- You should also be given a copy of the Owners Corporation Search Report that the land you purchased is affected by X amount of Owners Corporation (s).
You can contact Insure Risk if you are unsure and require advice on Owner’s Corporation Insurance.
Reinstatement and replacement insurance
Under the Owner’s Corporation Act 2006 – All owners corporations, except two-lot subdivisions, must take out reinstatement and replacement insurance for all buildings on the common property. If your unit is part of 3, 4 or more units, the buildings must be insured under compliant strata policy.
A building is defined as:
- replacement, repair and rebuilding of the damaged property
- costs of demolishing and removing debris from the site
- other costs such as employing an architect or surveyor
- shared services
- replacement of services and structures such as driveways and fences.
When renewing insurance, all owners corporations must ensure that the sum insured is more than the value of the buildings. An owners’ corporation should obtain valuations of the buildings it is required to insure. A prescribed owners’ corporation must:
- obtain a valuation every five years of all buildings that it is required to insure
- present the valuer’s report at the next general meeting.
What does Owner’s Corporation insurance typically NOT cover?
Owner’s Corporation insurance is like any other form of insurance, in that there are restrictions to the policy expressed as exclusions. Each insurer has different exclusions and policy terms and conditions. Make sure you understand what is excluded from the policy your body corporate / representative has purchased. Exclusions can be for certain risks, such as landslip or flood, or for certain property features such as fencing. Remember, strata policies do not cover your contents and personal items or landlord liabilities.
We recommend you contact Insure Risk advisor who is able to tailor the compliant policy for you.
Is this the only cover I need as a resident?
No. You should make sure you have appropriate contents cover for your belongings and for those things strata insurance does not protect such as owner’s or landlord liability inside the unit. You can take out a separate contents or landlord policy for this. Strata insurance covers only common or shared property & buildings. This may include some of the fixed parts of your unit, but will not cover everything. It is important you read the policy to understand what is and is not covered in your unit.
How much do we need to cover for the building and common properties?
The total sum insured should cover the building replacement value (not the purchase price) PLUS any associated costs in the case of a claim. The sum insured should include Removal of Debris, Demolition Costs, Architects fees and other professional fees. This can be 10-20% on top of what the builder’s require to knock down and rebuilt the properties. Sit down and work out how much it would cost you to repair and rebuild in the event of a natural disaster and work out from that how much excess you could afford to pay.
What cost factors contribute to the premium?
Each insurer develops and offers a unique commercial product in accordance with its underwriting appetite. Some common factors contributing to the premium include:
- Government taxes on insurance (stamp duty and GST)
- The age and condition of the building
- The replacement cost of the building
- The risk profile of the location
- The claims history of the strata complex
- Activities carried out on the premises, such as holiday letting
- The level of excess payment selected by the body corporate, payable at the time of a claim
- The costs of common property, for example car parks, stairwells, lifts and pools.
- Security System in the property
Where can owner’s corporation insurance be purchased?
Many retail home insurers or agents do NOT provide this compliant policy. There are several specialist insurers APRA approved that provide self-managed owner’s corporation properties or also those that are managed by body corporate manager. Insure Risk is a specialist insurance adviser and broker that manages Owner’s Corporation / Strata Insurance to self managed properties and body corporate. As part of the service, Insure Risk also provides claim management service in the event there is a claim to the property at no extra costs.
For more information about insurance for your owners corporation visit Insure Risk https://www.insurerisk.com.au/