This response to an industry specialist’s question about strata title insurance requirements has been supplied by Tyrone Shandiman, Strata Insurance Solutions.
Question: Is there a requirement to have a proper Strata product in all states or what are the strata title insurance requirements around Australia? Or can lot owners just take out a Domestic home product?
Is there a requirement to have a proper Strata product in all states or what are the strata title insurance requirements around Australia? Or can lot owners just take out a Domestic home product?
We have some customers inform us that have taken out a standard home policy, and I am not 100% sure this is correct. From what I understand from the Act here in NSW (Strata Scheme Management Act 2015) Section 160, the Owners Corporation must take out the insurance which covers fire, lightning, explosion and other occurrences.
However, does this still apply if there are two lots, and if the owners agree with this, or if the lots are physically attached?
Answer: There is no requirement under legislation to have a specific “strata” insurance policy, although in the absolute majority of cases a strata insurance policy is most appropriate.
There is no requirement under legislation to have a specific “strata” insurance policy, although in the absolute majority of cases a strata insurance policy is most appropriate and designed in a way that meets legislative requirements and properly covers the interest of all parties including the owners corporation, committee members and lot owners.
In short, in New South Wales the Strata Schemes Management Act 2015 and Strata Schemes Management Regulation 2016 requires the owners corporation to insure:
The building for full replacement value (in accordance with section 160 and 161);
Public Liability Insurance of $20,000,000 (in accordance with section 164 & regulation 40)
The act does not define that the policy must be a “strata” insurance policy for the building and public liability, however insuring under a home insurance policy can present a number of compliance issues with regard to the Strata Schemes Management Act 2015 and there are also a number of other considerations.
Firstly the owners corporation are responsible for insuring the entire building (which can be across multiple policies), except in the instances where there are two lots that are physically detached from each other. In such instances, owners can agree to not insure the building (and they can individually insure their building).
Home & Contents Insurers do not usually insure properties that are part of a strata title. If the owners are able to get the home and contents insurer to agree to insure the entire building (or say each lot separately under a separate policy) they need to make sure that the owners corporation has public liability insurance which would not be covered by a home and contents insurance policy. So they would need a separate public liability policy.
The owners corporation and lot owners need to have their interests properly noted on the policy.
Premiums for a strata policy that covers all items including the building for damage for full replacement and public liability of $20,000,000 are often cheaper than home and contents insurance.
Home and contents insurance does not offer cover for other exposures that owners may want such as Office Bearers Liability, theft of owners corporation funds, defending the body corporate against legal actions – a strata policy can offer these covers.
Over the years we have had clients call us to advise they have insured their lot which shares walls with other lots individually on a home insurance policy. Despite not being insured in accordance with the Strata Schemes Management Act 2015, it also creates major headaches at the time of a claim as the insurer has to determine how much they pay for parts of a shared building such as shared walls and slabs etc. Insurers do not cover part of a building, however there are instances we are aware of where a client calls a “trainee” in an insurers call centre who insures the lot that shares walls without understanding the implication if there were to be a claim.
Except in instances where there are two lots that are physically detached from each other, it is our recommendation that owners insure the property under a strata insurance policy with the individual owners insuring their own contents or landlords exposures under a separate contents or landlords insurance policy to meet their requirements under the Schemes Management Act 2015 and ensure there is adequate cover.
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This post appears in Strata News #208.
Tyrone Shandiman
Strata Insurance Solutions
T: 07 3899 5129
E: tshandiman@iaa.net.au
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. This information is designed as a basic guide with relation to cover and you should refer to your Policy Schedule and Product Disclosure Statement for all terms and conditions related to cover under any insurance policy. 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.
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