Strata insurance is a form of insurance that provides coverage for common areas of strata-titled properties. These properties include unit complexes, townhouses, and apartments. The insurance policy protects individual strata lot owners and the owner’s corporation from unexpected financial losses due to unforeseen events.
The policy usually covers shared areas and facilities, such as lifts, stairwells, roofs, walls, floors, swimming pools, car parks, and gardens. It may also provide coverage for the building’s fixtures and fittings, such as air conditioning systems and hot water units.
In most Australian states and territories, the owners’ corporation must obtain strata insurance. The cost of the insurance is usually shared between the strata lot owners through the payment of strata levies.
Strata insurance coverage can vary. It is essential for strata management companies to work with insurance brokers. This ensures the policy meets the property’s and owner’s corporation’s needs.
What does strata insurance cover?
Strata insurance is a crucial component for any strata-titled property. Having appropriate insurance coverage is compulsory, and it is the Strata Company and Council’s duty to ensure the property is properly insured, including public liability that covers injuries on common property. Strata insurance policies usually cover fires, floods, break-ins, accidental damage, and repairs, and can also provide coverage for lost rent and temporary housing for unit owners and tenants if the property becomes unsuitable.
Strata insurance is a type of insurance that covers common property, common areas, and shared assets in a strata-titled property. Strata insurance policies are designed to protect the owners and residents of the property against damage, loss, or liability.
Strata insurance policies typically cover the following:
1. Building Insurance: This covers the structure of the building, including walls, ceilings, floors, and roofs. It also covers any fixtures, fittings, and other permanent features of the building. Building insurance typically covers damage caused by fire, flood, storm, and other natural disasters.
2. Public Liability Insurance: This covers the strata corporation against any claims that may arise from injuries or damage caused to a third party on the common property or in common areas. For example, if a visitor slips and falls in the lobby, public liability insurance would cover the cost of their medical bills.
3. Contents Insurance: This covers any furniture, fixtures, and other items that belong to the strata corporation. This type of insurance is important because it covers items that are not covered by building insurance.
4. Machinery Breakdown Insurance: This covers the cost of repairing or replacing machinery and equipment that is used on the common property, such as elevators, air conditioning systems, and hot water systems.
5. Loss of Rent Insurance: This covers the loss of rental income that the strata corporation would suffer if the property becomes unfit due to an insured event, such as a fire or flood. This type of insurance can also cover the cost of temporary housing for unit owners and tenants who are displaced by the incident.
Who is responsible for organising strata insurance?
As a strata management company, it is important to understand the ins and outs of strata insurance, including who is responsible for organising it. Strata insurance, also known as body corporate insurance, is a type of insurance policy that covers the common areas and shared spaces of strata-titled properties, such as apartment buildings, townhouses, and other multi-unit complexes.
So, who is responsible for organising strata insurance? According to Australian strata law, it is the responsibility of the owner’s corporation to organise and maintain strata insurance. The owner’s corporation, also known as the body corporate, is comprised of all the individual lot owners in the strata-titled property. The owner’s corporation is responsible for making decisions on behalf of all the owners, including obtaining and maintaining the strata insurance policy.
The strata insurance policy covers a range of risks that may affect the common areas and shared spaces of the strata-titled property, including damage caused by fire, flood, storm, and other natural disasters. Additionally, the policy may cover liability claims, such as personal injury or property damage claims that occur on the common property.
It is important for the owner’s corporation to ensure that the strata insurance policy provides adequate coverage for the property. This includes considering the replacement value of the building, the common areas, and any fixtures or fittings that are shared by all owners. The policy should also take into account any unique features or risks associated with the property, such as swimming pools, elevators, or balconies.
It is important to work closely with the owner’s corporation to ensure that the strata insurance policy is in place and up to date. This may involve reviewing the policy regularly to ensure that it still provides adequate coverage and working with the owner’s corporation to make any necessary adjustments. It also involves ensuring that owners are aware of their obligations under the policy, such as reporting any incidents or claims as soon as possible.
How is the premium decided?
The premium is decided based on a number of factors, and they are payable by the unit owners within the strata property. Each state and territory has different laws and legislative requirements for strata insurance, however, some general contributors include:
- The exposure of the insured property to an insured event (i.e. age, building codes, building design and materials).
- Commercial activities carried out on the premises, such as holiday letting.
- The level of excess payment selected by the Strata Company, payable at the time of a claim.
- The replacement costs of common property, for example, car parks, stairwells, fire protection systems, lifts and pools.
What isn’t covered
Every insurance policy has its exclusions, and strata insurance is no exception. Each provider will have a different list of exclusions, or additional inclusions you can purchase with premium cover, so we recommend checking your policy for an exact list of what is and isn’t covered.
A general rule of thumb, however, is that strata insurance generally will not cover defects caused by poor workmanship, items typically covered by contents insurance (such as furniture and appliances), or damage sustained as a result of a lack of maintenance.
What does a strata insurance broker do?
When insuring your strata property, there are a couple of options to consider. The first would be to use a direct insurer to provide your cover. On the other hand, you can elect to have a broker assist with your policy and inclusions.
Brokers are experts in strata insurance and can provide advice and assistance on claims for both residential and commercial properties. Brokers will keep Strata Managers informed and educated on all aspects of their insurance cover, and will offer a specialised service when any claim is made. Importantly, strata insurance brokers have access to a range of Insurers and can provide multiple quotes for your strata scheme to consider.
Who can claim?
Your Strata Manager should be the first to know when there is an issue at your property. Any claims made will need to go through the Strata Company, who will also handle any excesses incurred as a result of the claim.
What is the difference between strata insurance and homeowners insurance?
As a strata management company, it is important to understand the difference between strata insurance and homeowners insurance. While both types of insurance provide coverage for property and liability risks, they are designed for different types of properties and ownership structures.
Strata insurance is designed for multi-unit residential or commercial properties that are owned collectively by a group of owners or shareholders. This type of insurance covers the common property and shared assets such as elevators, stairwells, lobbies, and swimming pools. It also provides liability coverage for any injuries or damages that occur on the common property.
On the other hand, homeowners insurance is designed for individual owners of single-family homes or townhouses. This type of insurance provides coverage for the structure of the home, personal belongings, and liability for any accidents that occur on the property. Homeowners’ insurance does not typically cover shared or common areas.
It is important to note that while strata insurance may cover common property, it does not typically cover the individual units or personal belongings of the owners. In these cases, individual unit owners should obtain their own insurance policies to cover their personal property and liability risks.
In summary, strata insurance and homeowners insurance are designed for different types of properties and ownership structures. Strata insurance covers the common property and shared assets of multi-unit properties, while homeowners insurance provides coverage for individual homes and personal belongings. Understanding these differences is crucial for ensuring that your strata management company is adequately protected against property and liability risks.
Is strata insurance paid for by the owners or the strata company?
You may often get asked the question of who is responsible for paying strata insurance. Strata insurance is a type of insurance policy that covers the common property of a strata complex, including shared areas such as the lobby, elevators, and car parks. It also provides coverage for any shared assets such as the building’s structure, roof, and exterior walls.
So, who is responsible for paying the strata insurance? The answer is both the owners and the strata company. The strata company is responsible for taking out the policy, but the cost of the insurance is typically shared between the owners through levies.
The amount that each owner is required to pay is determined by the unit entitlements of each lot in the building. This means that owners of larger lots will generally be required to pay more than owners of smaller lots. Levies are usually paid quarterly or annually, and the strata company is responsible for managing the collection of these payments.
It’s important to note that while strata insurance covers many aspects of the strata complex, it may not cover everything. Owners may need to take out additional insurance to cover their own personal property, fixtures, and fittings within their unit. It’s also important for owners to understand the limits and exclusions of the strata insurance policy to ensure they have adequate coverage.
As a strata management company, it’s important to educate owners on their responsibilities when it comes to strata insurance. This includes explaining what is covered under the policy, how the cost of the insurance is determined, and the importance of reporting incidents or claims as soon as possible. By providing this information and guidance, you can help to ensure that owners are aware of their obligations and can make informed decisions about additional insurance coverage if needed.
Want to know more? Give us a call at 08 9362 1166 or email us at info@esmstrata.com.au. You can also learn more about strata by visiting the News and Resources page on our website.
