Strata Title Insurance
A Body Corporate must take out insurance for its Title Scheme with each owner paying a portion of the cost through their levies. This is called Body Corporate Insurance also known as Strata Title Insurance.
Business Insurance Specialists has substantial experience in managing the insurance requirements of owners and body corporates.
The cost of insurance depends upon several factors including situational address of building, building sum insured, construction, protection against fire, type of occupancy and overall prior claims experiences. In recent times, additional issues have been damage arising from defects, external wall cladding, and if you are in Northern Australia. These issues have had bearing on obtaining cost effective insurance or even obtaining insurance.
Under government legislation, which changes from state to state, the normal legislated insurance that is required as a minimum is Building and Public Liability insurance.
In most policies, Strata Title insurers will provide coverage for Common Contents, Temporary Accommodation, Office Bearers Liabilities, Volunteer Personal Accident and Unit Owner Improvements.
What are examples of items not insured by a Body Corporate’s policy?
Due to the nature of individuals owning units within the one community, there is often misunderstandings on who is responsible – the Body Corporate or the individual Lot Owner – for damage. In all cases, it is advisable for an owner occupier, or a Landlords, to take out separate contents insurance that will automatically include Liability insurance for their individual lot.
Examples of incidents not insured under your Body Corporate policy include:
- Public Liability is restricted to claims made against the Body Corporate which is normally claims occurring in common areas only. If a matter occurred within a specific lot, then then is not the responsibility of the body corporate. As an example, a tenant electrocutes themselves due to a known fault, or due to lack of maintenance by the Lot Owner inside the unit. The Strata policy would not pay on this basis, and the Lot Owner would need to have their own Contents policy which includes their own Personal Liability automatically.
- A body corporate has no obligation to insure carpets, curtains and floating floorboards as part of the building. This means the responsibility to insure these items is placed on the lot owner through a separate contents insurance policy. Furthermore, and loss of rent claims that occur purely due to damage to Lot owner contents such as such as carpets, curtains and floating floorboards is not insured under a Strata Policy. This reinforces the need to have your own Landlords Policy with Loss of Rent cover.
- Differing states have different legislation, so it is important to note that items such as Paint and Wallpaper is not covered in NSW, and in QLD, air-conditioning units are not covered. An individual lot owner’s contents policy would be required.
I am a Developer. Who takes out the first year of Body Corporate insurance?
Once a body corporate is registered and the building is completed and certified by council, the insurance should be taken immediately.
As a developer you are responsible for taking out the first year of insurance. You can recover these costs by an adjustment in your sales contracts with the buyers. You need to have both an EGM and your insurance in place prior to settling your contracts so Insurance is time critical.
Business Insurance Specialists can assist in obtaining competitive terms quickly on your behalf through our relationships with all the Australian strata title insurers in the market.
Who pays the excess for a Strata Title claim?
Who actually pays the excess is of importance with any insurance claim, however, especially so with body corporates. In brief, the payment of an excess depends upon, where and how the damage occurred.
A summary for guidance is provided below based on the lots damaged.
Only one lot - the individual lot owner should pay the excess unless the body corporate decides that it is unreasonable. Typically, it would have to be because the committee believes the damage was caused by the body corporate or from common area.
Two or more lots - the body corporate should pay the excess unless the body corporate decides it is reasonable for the excess to be paid by 1 or more of the affected lots. In this case, if an individual lot owner left the tap on, and then caused damage to other units via water damage, then the individual lot owner would need to pay the excess. Of interest, the individual lot owner may need to have their own Contents and Liability insurance, as the Strata insurer may seek recovery of their payment by claiming against the individual lot owner.
One or more lots and the common property - the body corporate would normally pay the excess unless the body corporate decided otherwise.
Should I have separate Landlord insurance?
It is recommended to take separate Residential Landlord insurance as the Strata Title does not insure:
- Temporary wall, floor and ceiling coverings, carpet;
- Mobile or fixed air conditioning units for a lot;
- Curtains, blinds or other internal window coverings;
- Mobile dishwashers, clothes dryers or other electrical or gas appliances that are not wired or plumbed in;
- Loss of rent arising from damage to contents.
Am I insured for Water leaking damage from pipes?
Q: I have a pipe in my kitchen that has leaked and caused damage to all my cabinets, and then the carpet in my unit. Strata insurance covers the damage to the cabinets. Is the leaking pipe, and the tiles that need to be broken and replace to fix the leaking pipe, covered by insurance?
A: No, insurance does not cover lack of maintenance. The actual repair of the pipe, and the cost to repair the pipe, such as removing and replacing the tiles, are not insured.
What does my Body Corporate Building policy cover me for?
You are covered for:
- Replacement Value of Building Improvements and fixtures;
- Common area contents; and
- Underground services
- Building cover, which is in inside and outside a unit owner’s lot, includes:
- Toilet basins;
- Shower screens;
- Baths and basins;
- Cook tops and bench tops;
- Built-in cupboards;
- Doors both externally facing from the individual lot and internal doors; and
- Fixed tiling.
Common area contents insured includes:
- Carpets within a hallway, entrance or lobby;
- Indoor and outdoor furniture;
- Barbecue equipment;
- Pot plants; and
- washing machines and dryers owned by the body corporate which are housed on common property for the use of all residents.
The following items are not covered under the strata policy and owners must take out individual cover over these items.
- Floating floorboards
- Light fittings;
- Internal window coverings;
- Household appliances (e.g. dishwashers); and
- Valuables and personal equipment.
In some cases, a Strata Policy could be extended to provide coverage for Floating Floorboards, however, you would need to check the individual insurers coverage.
If you are in NSW, body corporate legislation for an individual lot owner’s unit does not require body corporate insurance coverage for Wallpaper, Paint, Floor and Ceiling coverings within a lot. Please ensure you are adequately protected by reviewing your relevant insurance policies.
Who is responsible for taking Body Corporate insurance, and what are the procedures to do this?
The responsibility of taking insurance is of the Body Corporate. In practice, this is via the Committee and the designated committee members. Normally the Body Corporate manager will have a preferred supplier that they use to provide insurance, however, the insurance can be provided via this supplier or totally independently by the committee direct.
To assist in the process of obtaining quotes, Business Insurance Specialists Pty Ltd as a specialist strata insurance broker has designed a simple questionnaire for a Body Corporate committee's use. This allows us to obtain in most cases all the relevant information we need for your strata insurance.
For a full review of your Body Corporate insurance, please contact Business Insurance Specialists Pty Ltd on (07) 3139 3900 or complete the form below and we will discuss coverage with you.