Residential strata insurance (known as body corporate cover in some states) is general insurance that covers common property under the management of a strata title or body corporate entity. Owners of strata titles typically share the premium costs of strata insurance as part of their strata fees and liabilities. Holding strata insurance is mandatory under each state’s relevant strata legislation.
What does strata insurance cover?
Strata insurance generally covers common or shared property as defined on the title of the property. This might include common areas, lifts, pools, car parks, gardens, wiring, balconies, walls, windows, ceilings and floors. Strata insurance must provide liability cover in the event people are injured on common property. You should check what is covered under your strata policy.
What does strata insurance typically NOT cover?
Strata insurance is like any other form of insurance, in that there are restrictions to the policy expressed as exclusions. Each insurer has different exclusions and policy terms and conditions. Make sure you understand what is excluded from the policy your body corporate or strata manager has purchased. Exclusions can be for certain risks, such as landslip or flood, or for certain property features such as fencing. Remember, strata policies do not cover your contents and personal items.
Is this the only cover I need as a resident?
No. You should make sure you have appropriate contents cover for your belongings and for those things strata insurance does not protect. Strata insurance covers only common or shared property. This may include some of the fixed parts of your unit, but will not cover everything. It is important you read the policy purchased by your manager or body corporate to understand what is and is not covered in your unit.
Where can strata insurance be purchased?
A number of insurers in Australia provide residential strata insurance cover. Many strata managers or body corporates use a broker or specialist underwriting agency to negotiate cover.
What cost factors contribute to the premium?
Each strata insurer develops and offers a unique commercial product in accordance with its underwriting appetite.
Some common factors contributing to the premium include:
• Government taxes on insurance (stamp duty and GST)
• The age and condition of the building
• The replacement cost of the building
• The risk profile of the location
• The claims history of the strata complex
• Commercial activites carried out on the premises, such as holiday letting
• Fee and commissions from agents
• The level of excess payment selected by the body corporate, payable at the time of a claim
• The costs of common property, for example car parks, stairwells, fire protection systems, lifts and pools.
Question the level of excess negotiated by strata managers and body corporates. Sit down and work out how much it would cost you to repair and rebuild in the event of a natural disaster and work out from that how much excess you could afford to pay.