NSW: Does our Owners Corporation Need Fidelity Insurance?

This article is about strata managers and fidelity insurance for NSW owners corporation and strata.

Question: If we appoint a licensed Strata Manager, is our owners corporation covered for Fidelity Insurance by the NSW Government, or is this something we have to take out separately?

Does an owners corporation in NSW managed by a Strata Management Agency need Fidelity Insurance as part of their Policy? Our Strata Manager has informed us that as they are a licensed Manager, we are covered by the NSW Government. The Dept of Fair Trading says this is correct per Part 5 Insurance of the Strata Schemes Management Act 2015.

If this is correct, then why would every insurance quote include Fidelity Insurance, with different amounts for different insurers every year?

Answer: In NSW, the Property Services Compensation Fund assists people who are out of pocket because a strata manager has failed to account for owners corporation funds held in trust.

Fidelity insurance covers embezzlement, theft, misappropriation, conversion or fraud relating to the owners corporation funds and assets (such as money held in bank accounts).

There is no requirement under the Strata Schemes Management Act to take out Fidelity cover, notwithstanding, most insurers offer this cover as an automatic benefit and there is no premium reduction for removing the cover.

In NSW, the Property Services Compensation Fund assists people who are out of pocket because a strata manager has failed to account for owners corporation funds held in trust.

Premiums reflect claims that an insurer incurs and for most strata insurance policies, the premium is either very negligible or there is no charge imposed by the insurer at all.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 07 3899 5129

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 Advisernet Australia AFSL No 240549, ABN 15 003 886 687.

This post appears in Strata News #538.

Have a question about strata managers and fidelity insurance or something to add to the article? Leave a comment below.

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