There’s a reason that even the most protected strata buildings still choose to set up comprehensive building insurance policies. Owners Corporations recognize that accidents and malicious acts can and do happen, whether it be fire, earthquake, lightning strikes, arson, vandalism, theft or burst water pipes.
An Owners Corporation caught flat-footed with inappropriate strata building insurance in place will need to foot a worrisomely high replacement bill. Having no insurance coverage is similar to gambling with the risk stacked heavily against you. Even if your building is spared from accidents or malicious acts, an Owners Corporation can still be penalized under the governing Strata Schemes Management Act 1996 for its lack of insurance coverage.
Owners Corporation required by law to have strata building insurance
The Act requires an Owners Corporation to insure the building with an approved insurer and obtain a valuation for the purpose of insurance at least once every five years.
Section 83 of the Strata Schemes Management Act 1996 requires an Owners Corporation for a strata scheme to insure the building and keep the building insured under a damage policy with an approved insurer. The building must be insured for at least the value of the building indicated by the last valuation obtained for the building, with the damage policy being in the name of the Owners Corporation.
Further, Section 85 of the same Act states that a building needs to be valued for insurance purposes at least once every 5 years. This ensures that the building is being insured for the correct amount.
What should a damage policy cover?
The NSW Department of Fair Trading prescribes that a damage policy must be able to cover the building for replacement or reinstatement of the building back to the same condition it was in when new. The damage policy must also cover payment for removal of debris and the payment of architects and others whose services are needed for the said replacement or reinstatement.
What parts of the building are insured in a damage policy?
The damage policy will typically cover the building, including some of the owners’ fixtures and fittings. Examples of fixtures and fittings included are:
- carpets in common areas
- hot water systems
- light fittings
- toilet bowls
- shower screens
- internal doors
- common air conditioning systems
- intercom systems
But it is important to distinguish that content and fittings within owners’ lots are usually not protected by strata building insurance. As recourse, lot owners can talk to their contents insurance provider to discuss extending their coverage to include content and fittings within their lots such as wallpaper, curtains, blinds and light fittings.
Other insurance policies
In addition to building insurance, an Owners Corporation must also take out public liability insurance with a minimum cover of $10 million, and under certain circumstances, may also need to consider taking out:
- workers compensation insurance
- voluntary workers insurance which covers a person who does voluntary work for the Owners Corporation in the building or common property
- Office Bearer’s legal liability cover
- Fidelity Guarantee to cover misappropriation of money or other property
Owners Corporations that require help with organizing building insurance can contact PRECISION STRATA for assistance. We can organise for a building valuation to be undertaken to ensure you are insuring for the correct value.
PRECISION STRATA who is an authorised insurance representative obtains 3 building insurance quotes on behalf of the Owners Corporation from approved insurers.
Please contact Shane Ball [email : firstname.lastname@example.org ], Licensed Strata Manager and Managing Director at PRECISION STRATA for assistance with your building insurance needs.