What are Strata Insurance Requirements?

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Strata Insurance covers insurance for buildings that fall under a strata title.

Damage to the Building:

Strata Insurance covers damage to the building defined by the applicable strata legislation (strata legislation relevant to your state) from sudden and accidental events, public liability insurance, and a range of other covers that protect the body corporate and its office bearers.

Consideration for Rebuilds:

Across Australia, strata insurance requires that a property is insured for its full rebuild value. The rebuild value can sometimes be more than the sale value of the units, but really when it comes to valuation of the property, that falls within the remit of a professional quantity surveyor.

We recommend seeking the services of a quantity surveyor to provider a recommendation on the sum insured to make sure that you comply with legislation.

The Body Corporate and Community Management Act 1997 (BCCM Act) in Queensland requires the body corporate to insure common property and body corporate assets for full replacement value for “damage” as defined in strata legislation. The BCCM Act also requires that the body corporate obtain an independent valuation stating the full replacement value of the building every five years.

However, in New South Wales, there is no specific legislative requirement to obtain a valuation at certain periods. The Strata Schemes Management Act 2015 does impose a requirement for the building to be insured for full rebuild value, and fines and penalties apply for non-compliance of the Act.

Strata Insurance covers certain fixtures and fittings.

The basic principle is that if you pick a unit up and shake it, anything that falls out is lot owner’s contents. These contents are not covered by strata insurance, and lot owners should have contents insurance or landlords’ insurance to cover it. This principle applies to Queensland and New South Wales.

Contents not covered by strata insurance include temporary flooring such as carpet, blinds and curtains, and appliances that are not attached.

Permanent fixtures may include but not limited to;

  • Retaining walls;
  • Kitchen and bathroom cabinetry. Do check your policy wording and exclusions as they do differ from state to state.

One example from Queensland, is that air conditioning units, whether fixed or not, are not covered by strata insurance. Instead, it is the lot owner’s responsibility to insure it under contents insurance.

The BCCM Act in Queensland requires the body corporate to insure, permanent fixtures including those inside a lot under the strata insurance policy. 


Question from QLD: My townhouse, which is a Standard Format Plan, is covered by strata insurance and this includes cover for the building and external windows and doors. I am responsible for the maintenance but if it is damaged, am I responsible or can the body corporate claim under strata insurance?

Question Summary:

I live in a townhouse complex that is a Standard Format Plan. We pay an annual strata insurance levy that covers the building and includes cover for external windows and doors. Under the Queensland Government in regard to a Standard Format Plan, it states that I am the one responsible for maintaining both the inside and outside of the building, including all the exterior walls, windows, doors, and even the foundations.

If my building is damaged or destroyed, am I held liable for the reconstruction of it? Or is the body corporate responsible as it is under strata insurance?

If strata insurance doesn’t cover the claim, am I able to get a reduction of the strata insurance levy I pay and instead pay for common property cover and pay for my own home or contents insurance?

Answer from Strata Insurance Solutions:

The BCCM Act in Queensland requires the body corporate to insure common property and body corporate assets for full replacement value for “damage” as defined in strata legislation. The body corporate is also required to insure to full replacement value, all buildings created under a standard format plan of subdivision where in one or more cases a building on one lot has a common wall with a building on an adjoining lot.

A common area of misunderstanding in strata lies in the difference between “responsibility to insure” and “responsibility to maintain”. The body corporate can be responsible for insuring property on strata buildings that a lot owner is responsible to maintain.

If the property is damaged, the first consideration is insurance (which is maintained by the body corporate). If the damage is not claimable (for example, the claim is below excess or excluded under the policy), the lot owner then becomes responsible for the cost of that maintenance.


Question from VIC: A tenant in my investment property has caused damage. Owners Corporation has billed me for the insurance excess. Am I, as the landlord and lot owner, responsible to pay because of damage caused by my tenant?

Question Summary:

I have an investment property for which a tenant (who has since left the place) caused damage to the garage door of the next door neighbour.

Owners Corporation has billed me for the insurance excess stating: “As the damage was caused by the tenant, the owner is responsible for the insurance excess on this claim.”

Why should I pay for damage caused by my tenant? What are my options and my rights?

Answer from Strata Insurance Solutions:

In Victoria, Section 23A of the Owners Corporations and Other Acts Amendment Act 2021 states:

(3) An owners corporation may levy a lot owner a fee to cover the cost of any of the following …

(a) an excess amount or an increased premium resulting from or attributable to an insurance claim, if the claim is caused by a culpable or wilful act or the gross negligence of …

(ii) a lot owner’s lessee; or …

In this instance, the Owners Corporation are more than within their right to bill the excess to the lot owner.

We recommend that the lot owner first clarifies whether the insurer has undertaken a recovery action against the tenant and if that action was successful. In such instances, the insurer will generally refund the excess less any expenses incurred.


Question from WA: I live in a 3 lot complex and 2 out of 3 of the units are rental properties. When a claim for damage is made under strata insurance, this increases the premium for all the strata lots. Is it reasonable that I have to bear the increase in insurance premium because of the tenants and the damage they cause?

Question Summary:

I live in a 3-lot complex. 2 of the 3 units are rentals. When tenants cause damage to the property, claims are made under the strata insurance policy that covers all 3 lots. Each time a claim is made, it increases the premium for all the strata lots.

I do not think this is reasonable because the landlords are collecting rent on their lots and I think they should have separate landlord insurance to cover damage caused by their tenants. Should I bear the increase in insurance premium because of the tenants and the damage they cause?

Answer from Strata Insurance Solutions:

Strata insurance covers all items defined as building – thus, it is not possible to get a separate landlord’s policy to cover building items that the strata policy covers. Therefore there is legislation requiring the strata corporation to have cover.

When you purchase into strata, you buy into the claim’s history of the complex.

Claims history is a major rating factor considered by insurers and therefore, it has an impact on insurance premiums. It is important to keep in mind that guidelines around claims history differs from insurer to insurer, policy to policy, and claim to claim.

To avoid your claims history impacting your insurance premiums, it is recommended that regular preventative maintenance is conducted. Unfortunately, the only way to avoid a shared claims history is to not own in strata at all.

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Tyrone

Tyrone Shandiman
Strata Insurance Solutions
LINK, Level 1, 57 Berwick St,
Fortitude Valley QLD 4006
Ph: 1300 554 165
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. 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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