NAT: Q&A Impact of rectification works on your strata insurance premium

This article is about whether completed building rectification works should your strata insurance premium.

Question: After building rectification works have been completed, should our strata insurance premium be reduced?

Answer: The impact of rectification works on your strata insurance premium depends on the specifics of each case.

Whether your strata insurance premium should be reduced following building rectification works is a nuanced matter, influenced by the nature and purpose of the rectification itself. Here’s how different scenarios could affect your insurance premium:

Rectification Related to a Previous Claim: If the rectification works were undertaken in response to a claim, it’s important to recognise that your claims history, a significant factor insurers consider when determining premiums, will be affected. This could potentially lead to a premium increase due to a history of claims, reflecting a perceived higher risk. Insurers rate on a three to five year claims history so it is possible the claim can have an impact for this period of time after the initial claim lodgement.

Rectification of Building Defects: When rectification works address specific building defects, there’s a theoretical basis for expecting a reduction in premiums. The rationale is that fixing defects should lower the risk of future claims, thereby justifying lower premiums. However, insurers may be cautious, especially with rectification works related to significant issues like major leaks. Insurers might prefer to keep premiums or excess levels unchanged for a period (typically a year) following the rectification. This approach allows them to assess whether the rectification effectively mitigates the risk of future claims, considering that subsequent claims are not uncommon after major repairs, especially if the initial issue is not fully resolved.

Given these considerations, the impact of rectification works on your strata insurance premium is highly individualised, depending on the specifics of each case. If an insurance broker represents your strata scheme, their role becomes crucial in navigating these complexities. A competent broker should not only advocate for the most favourable premium possible post-rectification but also explore alternative insurance providers. This proactive approach ensures that your strata scheme’s insurance coverage is appropriate and cost-effective, reflecting the reduced risk profile following successful rectification works.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 1300 554 165

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.

This post appears in the August 2024 edition of The QLD Strata Magazine.

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