Even considering an insurance policy is enough to give most people a headache – let alone handling insurance for a multi-storey apartment block.
In Victoria, Owners Corporations must ensure that they have insurance coverage for:
a. common property
b. public risk
c. every building which contains an owner’s lot (i.e. an apartment or a unit).
Strata Insurance is a necessity for Owners Corporation it helps cover the property and common contents of the scheme. Lot owners in a scheme typically share the costs of strata insurance among themselves.
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 ins and out of strata insurance and how it might apply to you.
In Victoria, the Owners Corporation Act 2006 requires the Owners Corporation to take out strata insurance to cover: The repair or replacement of the building and common property in the event of damage.
What insurance is required for an Owners Corporation?
The minimum insurance required for an Owners Corporation is:
- Reinstatement and replacement insurance of all buildings on common property. This covers the cost of a rebuild should any event such as a fire occur. The insurance must cover the replacement, repair and rebuilding of the damaged property.
- Public liability insurance for the Common Property. Such insurance for Common Property protects owners in case of unexpected damage and injuries. Owners Corporations with Common Property must have public liability insurance of no less than $20 million for the common property.
The Owners Corporation building insurance will cover the full replacement value of the building structure including improvements and fixtures. A building is defined as the structure and part of a building or structure (including walls, out-buildings, installations and other things attached to that structure) and pipes or cables for shared services. The insurance must cover for the replacement, repair and rebuilding of the damaged property. This entails cost of demolition and removal of debris, employment of architects/surveyors and replacement of services such as driveways and fences.
What insurance is required for multi-storey developments?
In Victoria, an Owners Corporation is responsible for taking out both reinstatement and replacement insurance. As well as public liability insurance for all lots in a multi-storey development if any of the lots are:
- Above or below another lot
- Above or below common property
This is not the case when:
- The lots are actually single-storey, such as multi-storey plans that define the space above and below the lots as common property
- The multi-storey development was registered under the Strata Titles Act 1967 and Cluster Titles Act 1974 and does not have lots above or below one another
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, 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
- Washing machines
- Carpet and in some policies, floating floors
- Removable fixtures
- Single unit hot water systems
- Loss of rent by tenant default
- Other insurance eg. Landlord Insurance and Personal contents
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 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 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.
At SSKB, our Owners Corporation Managers work closely with Collective Insurance Brokers (CIB) so they can help you to determine exactly what coverage you may 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 (eg. a hailstorm), the owner of the damaged property is usually responsible for paying the excess. When an event causes damage to multiple lots, the responsibility for the excess payment often falls on the Owners Corporation.
- 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 Owners Corporation insurance policy?
At an Annual General Meeting (AGM), the Owners Corporation must give Owners information about its insurance policies and any valuations that have been done.
It is a requirement in Victoria that that an Owners Corporation provide general insurance cover for common property and the Owners Corporation’s assets.
Ultimately, the best course of action is to understand what both your Owners Corporation insurance and personal insurance cover and seek appropriate independent insurance advice. If you have any questions or concerns, please contact your SSKB Owners Corporation Manager today.
