Strata insurance: what it covers and who carries it
Cover held by an owners corporation for the common property, statutory liability and office bearers of the scheme.
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In short
- Strata insurance is held by the owners corporation for the common property, not by individual lot owners for their contents.
- It is compulsory for strata schemes under state legislation, with the detail differing by jurisdiction.
- Valuation and the split between building and lot are where most disputes start.
Strata insurance covers the parts of a building that belong to everyone. The owners corporation holds it, the levies fund it, and the strata manager usually arranges it.
Because the insured is a scheme rather than a trading business, it behaves differently from every other cover on this site.
Also called: strata insurance, body corporate insurance, owners corporation cover
What the policy covers
The building and common property are the core, with public liability for the common property, office bearers cover for the committee, and commonly voluntary workers and machinery breakdown sections.
Lot owners insure their own contents and, depending on the state and the plan, their own internal fixtures.
Valuation and levies
The sum insured should reflect the cost of reinstating the building including demolition, professional fees and compliance with current codes, which is why periodic valuation matters.
Underinsurance shows up at the worst possible time and lands on owners as a special levy.
What people get wrong about it
The first error is assuming the strata policy covers what is inside a lot. Generally it does not, and the boundary differs by state.
The second is treating a landlord lot as covered by the strata policy for loss of rent, which usually needs a separate landlord policy.
The third is leaving the valuation to drift, so the scheme is insured for a building it could no longer rebuild.
Questions
- Do I need contents insurance if my strata scheme is insured?
- The strata policy generally covers common property and the building rather than what is inside a lot. Contents, and often internal fixtures, are the lot owner’s to insure.
- Who arranges the strata policy?
- The owners corporation holds it, usually arranged by the strata manager and funded through levies. Individual owners do not arrange it, though they pay for it.
Sources
- Moneysmart (ASIC) — General guidance on business insurance from the regulator’s consumer site. A starting point, not a definition of this cover.