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Do I need strata insurance?
All OwnersCorporations of a Strata Scheme must insure the building and keep it protected under a contract of insurance against fire, lightning, explosion, and any other occurrence stated in the policy, according to the Strata Act in NSW. This type of insurance also covers common property, which in many cases would include things like gardens, driveways, parking lots, and pools.
For the purposes of a strata scheme, a ‘building’ is defined as the structure depicted on the Strata Plan. The insurance also covers the things listed in the Strata Schemes Management Act 2015 as requiring coverage.
The roof and its roofcavity, which are represented in a thick black line, are considered common property (structure) and are protected as part of the ‘Building Sum Insured.’ The building insurance would also cover anything labeled ‘CP’ (Common Property).
- Infrastructure such as wire and service pipes located in common area spaces are often considered common property. Damage caused by leaking or burst pipes within common walls – infrastructure such as wiring and service pipes found in common area spaces are typically considered common property.
- Glass shattering due to unintentional collision – rocks thrown up, doors slammed shut, etc.
- Graffiti and theft are unfortunately prevalent causes of malicious damage to shared property.
- Fire, while not as common as other causes, has the ability to cause significant property damage.
It’s crucial to know as a strata owner that some insurance carriers may expand coverage to include “Lot Owners Fixtures and Additions.” This means that if an insurable incident damages those permanent fixtures within a Lot, they will be covered.
These objects are normally excluded from coverage in your contents/landlords insurance if they are already protected under the Owners Corporation’sinsurance policy, but owners should verify with theircontents insurer to be sure.
CHU Insurance (2019) includes the diagram below in their Contents Fact Sheet to show what is and is not covered by their strata insurance policy:
As a result, double-check that your Owners Corporation’s coverage covers LotOwners Fixtures and Additions.
Despite the fact that an item would ordinarily be protected by the Owners Corporation’sinsurance policy, owners should keep the following in mind:-
- There is no bylaw in the complex that assigns accountability for the item to the unit owner.
- The installation has received the necessary approvals, such as from the City Council and/or the Owners Corporation.
An Owners Corporation is required by the Strata Schemes Management Regulation 2016 to have Public Liability Coverage of at least $20 million.
This will protect the Owners Corporation in the event of an incident on common property that results in injury to a person or property.
- Owner Investors Those who rent out their lot will be covered for any lost rent (up to the policy limit) if their lot is damaged by an insurable event and the insurer determines it is unusable. The insurance pays the owner the amount of rent that the tenant would typically pay, and the renter will use that money to support alternate housing rather than paying the owner.
- Owner-occupiers These are people who own their own homes. If an insurable occurrence renders a Lot unusable, the owner-occupier will be paid market rent to rent out their property and utilize the proceeds to pay for substitute lodging while the property is being repaired.
Until the lot is no longer uninhabitable, the amount of lost rent will be paid to the owner in accordance with the policy’s amount. The standard amount of coverage is 15% of the building’s insured value. For example, if the building is insured for $3,000,000, there will be $450,000 in loss of rent coverage per claim.
It’s vital to remember that the tenant’s fees or losses incurred as a result of having to vacate the premises are usually not compensated.
This protects anyone who volunteers to labor on behalf of the Owners Corporation and is wounded while doing so. If owners want to do unpaid work, they should contact the strata manager so that we can put a note on the policy with the insurer.
This sort of insurance covers the Owners Corporation for any losses incurred as a result of a wrongful conduct committed by a member of the Strata Committee while performing their duties.
Hopefully, this post has answered some of your Strata Insurance-related questions.
Note that this is only general guidance; if you have any specific questions, we will gladly seek clarification from your strata building insurer.
What does strata insurance usually cover?
A strata insurance coverage typically covers homes inside a single building, complex, or parcel of land. The building(s), parking, and other common spaces inside the lot or complex are usually covered by these policies.
What is not covered by strata insurance?
Strata insurance does not cover personal property or items that are not permanently attached to the structure. Internal fittings and fixtures, lighting, carpets, flooring, furniture, electrical devices, jewelry, and other personal belongings are examples of items that aren’t covered by strata insurance.
If you rent out your home, bear in mind that strata insurance does not cover tenant theft or interior damage, legal fees incurred as a result of pursuing legal action against tenants, or loss of rent if a tenant fails to pay.
You can purchase contents insurance or landlord insurance to safeguard your goods from loss, theft, or damage, as well as to protect yourself from any problems with your tenants.
Underwriter market
We’ve observed changes in risk appetite over the last 12 months as underwriting requirements have tightened. As a result, the following circumstances may arise:
- Strata properties classified as “high risk” are subject to special policy restrictions and insurance cover exclusions (information on what defines “high risk” can be found below).
- Certain policy sections are subject to construction excesses and cover limitations.
- Insurers are offering short-term renewal periods in cases where problems have been present for a long time.
- Expandable Polystyrene Sheets and Aluminum Composite Cladding concerns have a lower coverage capacity.
Cladding
- Expandable Polystyrene Sheets and Aluminum Composite Cladding are now more than ever on the minds of insurers.
- In the case of a fire, cladding excesses ranging from $5,000 to $100,000, or 10% of the Building Sum Insured, are being applied to many strata houses.
- To properly analyze the risk, insurers demand a Building Materials Report, which includes the names of the products used in the building’s construction, their location, and proportion. This is true for both renovations and new construction.
- Updates on the cladding removal project should be sent to your broker so that the insurer is aware of any changes in the building’s risk.
Defects
- As part of your Duty of Disclosure, all deficiencies must be notified to your insurance broker and insurer.
- If a problem is not corrected, insurers must follow their underwriting guidelines, which may result in higher premiums, higher deductibles (excesses), specific terms and conditions, and short-term policies that leave a property without coverage.
Strata Insurance premiums
- For properties with no pending claims or faults, Strata Insurance premiums are currently increasing by 10-20 percent or more on average.
- Premium rate increases will be much higher for strata properties with known concerns. Why? Strata property insurance must be priced to reflect the risk and characteristics of the building.
- A growing proportion of strata properties are classified as’very high risk,’ which means they have hefty repair expenditures. This can be attributed to a variety of factors including location, age, design, and construction methods.
- Claims history, maintenance issues, and how a facility is used can all influence the risk profile of the property and, as a result, the premium rates charged. The building may, for example, comprise flats utilized for vacation rental and/or ‘high-risk’ business activity.
Claims
- Due to the increasing amount of severe weather events and natural disasters that we are experiencing in Australia, Strata Insurance claims are becoming more common. As a result of the increase in claims, insurer earnings are being strained, putting increasing pressure on Strata Insurance prices across the board, particularly in those properties that have seen claims.
- Insurers are hesitant to issue quotes for houses that have outstanding insurance claims and/or rectification work that has yet to be completed.
Does strata insurance cover internal walls?
Common property such as common areas, car parks, stairwells, lifts, gardens, and common floors, walls, and ceilings are all covered by strata insurance.
What is the difference between strata insurance and home insurance?
Building insurance usually covers a single household property as well as permanent constructions such as a garage and a granny apartment.
Strata titled properties, on the other hand, usually have a body corporate that is required by law to carry residential strata insurance. This usually refers to the building(s) and any common or shared property that the building strata title manages.
Strata insurance typically covers common areas including gardens, elevators, walls, windows, pools, ceilings, and floors, as well as some liability coverage for injuries to persons on common property. Because strata rules and insurance change from state to state, you should double-check what is covered under your strata coverage.
Contents insurance versus strata insurance
Items that are included in the contents cover for non-strata titled homes are also included in the contents cover for strata titled homes. Personal belongings such as clothing and furnishings are often covered by contents insurance.
However, there are several aspects of your residential contents insurance policy that are not covered by strata insurance and that you should consider.
Any changes you make to your own fitted fixtures or fittings, such as replacing the kitchen, bathroom, or built-in wardrobes, may not be covered by your strata insurance. Check with your strata management to see what you’re insured for to make sure you’re in the know. If there are any gaps in coverage, talk to your home insurance about adding these upgrades with your contents coverage.
Tell your insurer about any changes that raise the value of your house, such as expansions or loft conversions, if you have a non-strata titled home. Because these factors may increase the value of your home and the expense of rebuilding it, you may need to increase your building insurance to be covered.
Because strata rules and strata insurance vary by state, and insurance coverage varies by provider, you should double-check what is covered under your policy.
Does strata insurance cover water damage?
Any abrupt or inadvertent water damage can be covered by strata insurance. This includes things like leaking pipes or a burst water pipe, as long as you file a claim as soon as you identify the damage.
Who pays insurance excess in strata?
What does public liability insurance cover, according to a question from a NSW landowner? Whitbread Insurance Brokers’ Lia de Sousa supplied the following response.
When a claim is made under a strata scheme’s public liability insurance, who pays the excess?
EG. What happens if a property owner spills milk, cleans it up, but someone slips anyway since the premises was not cleaned properly in NSW? Is the owner covered by public liability insurance, and does the owner or the Owners Corporation as a whole pay the excess? We’re talking about a mishap, not a deliberate act.
Answer: A Strata policy’s Public Liability coverage protects against a person’s death or injury, as well as property damage, for which the Owners Corporation (OC) could be found legally liable and forced to pay compensation.
which the Owners Corporation could be held legally liable for and be forced to compensate.
If the insurance specifies an excess, the Insured is usually responsible for paying it.
Strata Insurance policies are designed to protect the Owners Corporation against losses that occur in a shared area for which they may be held legally liable. In the aforementioned scenario, a claim may be filed under the Strata policy’s Public Liability clause, and the insurer will determine if the Owners Corporation is liable. If an excess is required, the Insured is responsible for paying it.
Individual lot owners should consider public liability insurance for any exceptional situations concerning their lot that are not covered by the Owners Corporation’s insurance.