You are here: Strata Schemes > Strata Insurance > Strata Insurance It is important for lot owners to understand how insurance arrangements work in a strata scheme. The Strata Schemes Management Act contains a number of provisions about insurance, and owners should be aware of these in order to protect both their own and the owners corporations interests.
In general terms, an owners corporation is responsible for the following insurances:-
Building Insurance:
The owners corporation has a duty to insure the building in the strata scheme under a damage policy with an approved insurer.
This requirement does not apply to an owners corporation comprising of two lots if the owners decide by unanimous resolution, and the buildings comprised in one of those lots are physically detached from the buildings comprised in the other lot, and no other building in the scheme is on common property.
A damage policy must cover the building if damaged or destroyed by fire, lightning, explosion or any other thing in the policy:
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for the replacement or the reinstatement of the building back to the same condition it was in when new
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for the payment for removal of debris and the payment of architects and others whose services are needed for the replacement or reinstatement.
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In addition the amount of cover must allow for inflation for a period of 18 months from the time the insurance is taken out.
The building includes owners’ fixtures and fittings. Fixtures and fittings are items like carpets in common areas, hot water systems, light fittings, toilet bowls, sinks, shower screens, cupboards, internal doors, stoves, common air conditioning systems and intercom systems.
Strata Insurance Valuation:
The most reliable way of obtaining an estimate of value for insurance purposes is to obtain an independent valuation at regular intervals. The Strata Schemes Management Act requires an owners corporation to obtain such a valuation at least every 5 years and to maintain the insurance at a level inline with the most recent valuation. It may be in the interest of the owners corporation to obtain valuations at more frequent intervals.
Public liability:
The owners corporation is required to insure, with an approved insurer, against death or injury to a person or damage to property for which the owners corporation could become responsible. The minimum cover is $10,000,000.
Workers Compensation:
Recent amendments have been made in relation to Workers Compensation insurance, for more details regarding these changes please click here
Voluntary Workers Insurance:
The owners corporation must insure, with an approved insurer, against any damages that it may become liable for when a person does voluntary work for the owners corporation in the building or on the common property. A voluntary worker is any person who does work without receiving or expecting to receive any fee or reward.
Other Insurances:
The Strata Schemes Management Act allows an owners corporation to obtain insurance to cover office bearers liability. While this insurance is not compulsory, a motion to consider obtaining such cover must be included in the agenda of each Annual General Meeting if such insurance has not been obtained.
Additionally, the owners corporation may decide to take out insurance cover to provide protection against misappropriation of money or property of the owners corporation.
Contents Insurance:
Owners should also take out their own contents insurance to ensure that their interests are protected.
Owners should ensure that everything in the lot which does not form part of the building is insured under a contents policy. Items such as carpet, wallpaper, paint, furniture and furnishings should all be covered under a contents policy.
Often issues arise as to whether items are covered under the owners corporations policy or whether they are covered under the owners contents policy, therefore owners need to address these issues when considering the type and extent of the insurance they require.
Some insurers offer policies that “dovetail” with each other. In other words, the items not covered under the owners corporations insurance policy are covered under the contents policy. Where different companies issue the policies this “dovetailing” effect is sometimes not achieved.
The Strata Agency works with a number of specialist strata insurers, if you would like any further information please contact us.
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