Everything you need to know about strata insurance – A complete guide

Curious about strata insurance and exactly what it covers? You’re not alone. We receive numerous questions about strata insurance daily, and in this guide, we’ll address the most common enquiries to help you understand its importance.

1 WHAT IS STRATA INSURANCE?

Strata insurance is designed to protect you and your property as a lot owner. It provides general insurance cover for common property under the management of a strata title or body corporate entity. Typically, the premiums for strata insurance are shared amongst the lot owners as part of their strata fees and levies.

2 IS STRATA INSURANCE MANDATORY?

Holding strata insurance is mandatory under each state’s relevant strata legislation. However, legislative requirements for each state and territory vary. You should always check that your insurance meets those specific legislative requirements. If your property is professionally managed, your strata manager will typically arrange this insurance on your behalf.

3 WHAT IS COVERED UNDER A STRATA INSURANCE POLICY?

Strata insurance policies cover material damage as a result of an insured peril to structural fixtures – including fixed plant, machinery and underground services. These policies also provide cover for owners’ fixtures, fittings and improvements which form part of the building. Some of these items may include built-in ovens, stovetops, kitchen cupboards, hand basins, baths and showers. Common policy features include:

• Public liability Covers the legal liability of the Owners Corporation. This does not insure the liability of the unit owner, except where liability relates to the Owners Corporation’s property or common contents.
• Common contents Covers appliances, equipment, furniture, carpets, fittings and works of art in any common area for which the Owners Corporation is responsible.
• Loss of rent and/or alternative accommodation If a unit becomes uninhabitable as a result of an insured peril, the unit owner can claim for loss of rent or alternative accommodation during the period that the premises are unfit for occupancy, based on the rental value of a unit, subject to approval by the insurer.
• Personal accident for voluntary workers Provides compensation to any person who carries out voluntary works on behalf of the Owners Corporation. The volunteer worker’s name must be recorded in the books of the Owners Corporation.
• Building replacement and reinstatement Provides cover for the building structure and any fixtures and fittings in common property areas.
• Fidelity guarantee Protection for the Owners Corporation against fraudulent embezzlement or fraudulent misappropriation of the Owners Corporation’s funds and tangible assets.

4 WHAT OPTIONAL EXTRAS CAN BE ADDED TO A STANDARD STRATA INSURANCE POLICY?

In addition, the following policy additions should be considered carefully and discussed further with your Owners Corporation:

• Office bearers Protects the members of the committee where liability has arisen from an alleged or wrongful act, omission or breach of duty. Covers the liability and legal costs up to the sum insured. Note that fraudulent acts are not insured under this insurance policy. This is an optional cover and an additional premium will apply.
• Catastrophe Provides an additional sum where the building is considered a total loss or partial loss due to catastrophe where a state of emergency is declared such as an earthquake, bushfire, tsunami or cyclone. It’s important to note that coverage varies for this feature. Some insurers provide automatic catastrophe cover as a percentage of the building sum insured, while others will charge a premium to offer a selected percentage of the sum insured. Catastrophe cover is a specialised policy feature and should be discussed by the Owners Corporation if protection has not been purchased.
• Machinery breakdown Provides cover for sudden or unforeseen physical destruction or damage to machinery, however this is an optional cover and an extra premium will apply.

5 WHAT IS NOT COVERED UNDER A STRATA INSURANCE POLICY?

Strata insurance specifically excludes contents within individual units such as carpets, curtains, blinds, light fittings and electrical appliances not actually wired into the premises. These items should be insured separately by your contents insurance or landlord insurance policy.

6 WHAT IS THE RECOMMENDED LEVEL OF PUBLIC LIABILITY INSURANCE FOR A STRATA PROPERTY?

In Australia, different states have different statutory requirements for public liability insurance when it comes to strata properties.

NSW and Victoria

The minimum liability insurance statutory requirement for NSW and Victorian strata property is $20,000,000.

Other states and territories: Queensland, South Australia, Western Australia, Tasmania, ACT, NT

In all other states and territories (excluding NSW and Victoria) the statutory requirement and minimum level of public liability insurance required for each strata property entity is $10,000,000. However it should be recognised that the standard liability limits currently offered with domestic home and contents insurance is between $20,000,000 and $30,000,000; accordingly, we recommend that you insure for a minimum liability of $20,000,000.

If you are unsure and need to discuss public liability limits for your strata entity, you should call your strata insurance broker to ask for advice specific to your situation.

7 DOES THE OWNERS CORPORATION NEED A BUILDING VALUATION?

The law requires that buildings are insured for their full replacement and reinstatement value. We recommend that the Owners Corporation obtain a professional property valuation every three years.

8 WHAT IF I RENT OUT MY STRATA PROPERTY?

If you own and lease your unit / apartment as part of a strata complex, it is essential to have a landlords insurance policy to protect your investment. Residential strata insurance only provides general insurance cover for the building, common property and common contents. The cover provided by the strata building policy ends when you cross the threshold of your individual property. Landlord insurance is designed to cover:

• Accidental loss or damage to contents in your unit from events such as fire, flood or storms
  It can cover items such as carpets, light fittings, washing machines, curtains and blinds, as well as loss of rent if the unit is unfit to be occupied.
• Malicious damage to contents/buildings caused by tenants and / or their guests.
• Loss of rent if your tenant defaults.

9 WHAT IF I LIVE IN MY PROPERTY?

As an owner occupier of a strata property, you should arrange a contents insurance policy. Contents insurance is designed to cover household and personal possessions such as clothing, jewellery, furniture, TVs, computers, internal carpets, blinds and electrical appliances belonging to you and other family members. In addition to this, contents insurance policies provide legal liability protection for any damage to third party property or third party injuries that may occur anywhere in Australia.

10 WHERE CAN YOU FIND HELP WITH YOUR STRATA INSURANCE?

If you require further information about how you are covered under a strata insurance policy, including any additional optional extras, you should reach out to your Owners Corporation manager or speak with one of our specialist strata insurance brokers here at Whitbread Insurance Brokers. You can call us on 1300 424 627, email us at info@whitbread.com.au, or find out more by visiting us online at www.whitbread.com.au.