Owners Corporation Insurance can be complicated, leaving many Owners unclear about what the Owners Corporation responsibility is, what is covered by the Owners Corporation and what must be covered by individual Owners. In this article we will guide you through the different types of insurance and how they might apply to you.
What insurance is required for an Owners Corporation?
It is the responsibility of an Owners Corporation to ensure they have the minimum insurance required:
- Reinstatement and replacement insurance of buildings on common property. This covers the cost of a rebuild should any event such as a fire occur. The insurance must cover for the replacement, repair and rebuilding of the damaged property.
- Public liability insurance for the Common Property. Insurance for Common Property protects owners in the case of unexpected damage and injuries. Owners Corporations with Common Property must have public liability insurance of no less than $10 million for the common property.
Owners in two-lot strata schemes may not need Strata building insurance if:
- The buildings in the two lots are physically detached
- No buildings or parts of a building are located outside the two lots (for example, on common property)
- The Owners Corporation passes a unanimous vote that they don’t need to get building insurance. In this instance, they may choose to get individual building insurance instead.
What insurance is required for mixed-use Owners Corporations?
Developments with Lots used for different purposes, such as shops and homes, are called ‘mixed use’. The cost of insurance may be higher for some lots than others in a mixed-use development.
Specific lots within an Owners Corporation have the option to pay an extra premium for increased risk.
What does the Owners Corporation NOT provide cover for?
As an Owner, it is important to be aware of the items that the Owners Corporation doesn’t provide cover for, including but not limited to:
- Single air conditioners
- Curtains, blinds
- Dishwashers, washing machines
- Carpet and in some policies, floating floor
- Removable fixtures
- Single unit hot water systems
- Loss of rent by tenant default
- Other insurance such as Landlord Insurance and Personal content
What insurance do Owners need to have for their Lot/s?
Every resident should have a form of contents insurance to cover inside their property, and this may need to cover contents, carpets, curtains, and certain fixtures such as split system air conditioners and liability cover for third party injury within their unit. Again, a review of your strata policy will assist you in determining your best option.
If you’re renting out your property, consider landlord insurance, which should cover items that are part of the property’s features that aren’t covered by strata insurance – these may be items such as an oven, light fittings, carpets and curtains.
Some insurance policies will also protect your property from accidental and deliberate damage or theft of your property by tenants as well as loss of income should a renter default on their payment.
If your property is part of a letting pool, talk to your insurance broker about short stay landlord insurance and whether this policy provides the right type of coverage for you.
At SSKB, our Owners Corporation Managers work closely with Collective Insurance Brokers (CIB) so we can help you to determine exactly what coverage you require.
What is renter’s or tenant’s insurance, and why do I need it?
Whether it is fire, theft or storm related, protecting personal possessions is the primary aim of renter’s or tenant insurance.
There are low-cost contents insurance policies on the market to cover tenants for the basics, and it is worth reviewing your policy before its renewal each year to ensure that the level of coverage is still appropriate.
Depending on your insurer, renter’s contents insurance can also cover accidental damage, coverage of property when you’re moving between premises and even cover goods in storage.
The Insurance Council of Australia has the following great tips to make sure you’ve got all the bases (and property) covered:
- Check the defined events in your Policy Disclosure Statement (PDS) to make sure they cover you for the risks you face.
- Insurers may treat professionally managed properties differently to if you manage the property yourself.
- Holiday properties may require a short-stay landlord policy.
- You can reduce your premium by taking out a higher excess.
- Check your policy to see if it covers contents inside the property that you allow your tenants to use.
- Strata insurance policies will not cover you for the risks associated with leasing your unit or apartment.
- An insurance broker can help find a policy that’s most appropriate to your needs.
Who is responsible for paying the insurance excess?
That will depend on the Lots involved and the nature of the claim:
- Where a person has either accidentally or maliciously caused damage, that person is generally responsible for paying the excess.
- When an external event has occurred (for example, a hailstorm), the owner of the damaged property is usually responsible for paying the excess. This differs when more than one lot is damaged by the event, in which case the Owners Corporation will often pay the excess.
- When a building or maintenance failure has caused damage, the person responsible for the maintenance of the cause is usually responsible for the excess.
How do I make a claim?
If the claim involves private property and contents, then you should contact your insurer or broker. If the claim involves damage or loss to common property, the Owners Corporation Manager should be notified immediately. Your Owners Corporation Manager will notify the insurer or broker and organise any necessary work on the Common Property.
In the case of damage or loss, it is best to:
- Provide your Owners Corporation Manager with the details of the incident and affected parties
- Allow unit access to tradespeople if need be
- Take reasonable steps to reduce further damage or loss
- Inform police if any damage is criminal
- Leave damage untouched, unless temporary repairs are crucial
How do I find out about my Owners Corporation insurance policy?
At an Annual General Meeting (AGM), each year the Owners Corporation must give Owners information about its insurance policies and any valuations that have been done.
It is a requirement that that an Owners Corporation provide general insurance cover for common property and the Owners Corporation assets.
Ultimately, the best course of action is to understand the insurance responsibilities of the Owners Corporation and what your personal insurance covers. It is important to seek appropriate independent insurance advice.