Even considering obtaining an insurance policy is enough to give people a headache- let alone handling insurance for a multi-story apartment block.
Strata Insurance is a necessity for Owners Corporation it helps cover the property and common contents of the scheme. Typically, all lot owners in a scheme share the division of costs for strata insurance.
OC 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 ins and out of OC insurance and how it might apply to you.
In NSW, the Strata Act requires all Owners Corporations in a Strata Scheme to ensure the building and keep the building insured under a contract of insurance against fire, lightning, explosion and any other occurrence specified in the policy.
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 OC 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, you must be aware of the items that the Owners Corporation doesn’t provide cover for. This is 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.
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. In cases where an event causes damage to multiple lots, the Owners Corporation typically assumes responsibility for paying the excess amount.
- 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 find out about my OC insurance policy?
At an Annual General Meeting (AGM), each year the Owners Corporation must give Owner’s 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.