Frequently Asked questions (fAQs)

Strata insurance, also known as body corporate insurance, typically covers common or shared property under the management of a strata title or body corporate entity, along with building cover for lot owners' property that forms part of the strata property. This type of insurance is common in multi-unit complexes like blocks of units, apartment buildings, and townhouses.

Strata insurance generally includes cover for:

Building Cover: This includes protection against damage to the structure of the building(s), and fixtures due to events like fire, water damage, storm, flood, malicious damage, or accidental damage.

Public Liability: This covers the body corporate' legal liability for death or injury to people on common property or loss or damage to others ' property that the body corporate is responsible for.

Common Contents: This covers items owned by the body corporate in common areas, such as pool & gym equipment, furniture, carpets, artwork & curtains.

Fidelity Guarantee: Protection against embezzlement, theft, misappropriation, conversion or fraud relating to the body corporate funds and assets, such as your sinking fund.

Office Bearers Liability: This provides protection for members of the managing committee against personal liability arising from alleged wrongful acts in their management of the corporation.

 

Catastrophe Insurance: This provides additional cover on your sum insured if your property is damaged in a Catastrophe (state of emergency) event. Cover is offered because in catastrophe events, re-build costs increase due to higher demand, which increase the cost of labour and building materials.

Legal Defence Costs: Legal Defence Costs cover Legal fees, costs, and expenses that you incur in legal proceedings initiated against the body corporate. It should be noted that this cover is limited to the costs associated with defence costs only and does not extend to cover settlements, judgements or damages.

Machinery Breakdown: Covers the breakdown events for machinery equipment such as machinery items including (but not limited to) pumps (including pool pumps), electric garage doors, lift/elevators, central air-conditioning units and other machinery or electrical equipment.

Appeal expenses (occupational health and safety): Covers costs incurred in appealing against any improvement, prohibition notice or determination by any court or tribunal made under any occupational health and safety or similar legislation.

Audit: Covers the cost of professional fees (such as accountants) for the purposes of complying with a government audit.

Strata insurance typically does not cover the personal contents of individual unit owners. Unit owners are responsible for obtaining their own contents or landlords insurance for personal contents, including temporary flooring such as carpet, blinds and curtains, appliances that are not permanently attached, and aircon units servicing an individual lot (QLD only). Furthermore, individual owners also need to consider public liability insurance for events within their own unit.

The exact coverage details will vary depending on the insurer and the specific policy taken out by the strata corporation, so it's important for strata committees and unit owners to review their policy carefully and understand what is and isn't covered.

Strata insurance is mandatory in Australia for properties registered under a strata title or similar legislation. This is governed by the respective strata legislation in each state and territory within Australia. It requires the owners' corporation (also known as the body corporate) to insure their building, common property, and fixtures to a reinstatement and replacement value.

The specifics of the requirements can vary by state and territory, but typically the following are mandated:

• The insurance must cover full replacement value of the building(s) defined by state or territory legislation.
• Public liability insurance is also required to cover people injured on common property.

The strata insurance must be taken out by the body corporate or owners' corporation and is funded by levies collected from all the owners. Failure to have adequate strata insurance can result in significant financial risks for the owners and possibly legal repercussions (fines & penalties) for the owners' corporation.

It is important for strata owners and committees to regularly review their insurance to ensure it meets legal requirements and adequately covers all necessary aspects of their property and liabilities.

Strata Insurance and Home Contents Insurance cover different aspects of living in a strata-titled property. Here's a breakdown of the key differences between the two:

Strata Insurance (also known as Body Corporate Insurance):

Coverage: Strata Insurance specifically covers the building and common areas of a strata-titled property. This includes shared spaces such as the lobby, pool, gardens, car park, elevators, gym, and building defined by legislation including building in individual lots.

Insured Party: It is taken out by the owners' corporation or body corporate, which is the collective group that manages the entire strata scheme; however, lot owners have an insurable interest in the property section of the policy.

Mandatory: In Australia, this type of insurance is generally mandatory and covers events such as fires, water damage, storms, and accidental damage to the building.

Common Contents: The policy covers contents items owned by the body corporate in common areas such as shared appliances pool & gym equipment, furniture, carpets, artwork & curtains.

Liability: It includes public liability insurance for incidents that occur in the common areas.

Home Contents Insurance:

Coverage: Home Contents Insurance covers the personal possessions within an individual's unit or lot, which Strata Insurance does not cover. This includes contents items like furniture, electronics, clothing, jewellery, and other personal items. It also extends to cover temporary flooring such as carpet, blinds and curtains, appliances that are not permanently attached, and aircon units servicing an individual lot (QLD only).

Insured Party: This policy is taken out individually by the owner or tenant to protect against loss or damage to their personal belongings.

Optional: Unlike Strata Insurance, Home Contents Insurance is not mandatory, but it is highly recommended to protect one's personal assets.

Liability: This insurance also typically includes a certain amount of personal liability coverage, which can protect the insured if they are found legally responsible for injury to another person or damage to their property.

In summary, Strata Insurance is for the building and shared areas and is taken out by the Body Corporate. In contrast, Home Contents Insurance is for an individual's personal belongings within their own unit and is taken out by the individual owner or tenant. Residents in strata-titled properties often need both types of insurance for comprehensive coverage: the Strata Insurance arranged by the body corporate and their own Home Contents Insurance for their personal items.

The premium for Strata Insurance is calculated based on a variety of factors that assess the risk and potential cost to the insurer in the event of a claim. Here are the main elements that typically influence the premium:

Building Value and Replacement Costs: The insurer will consider the overall value of the building and the cost to replace it in the event of total loss. This includes rebuild costs, demolition and removal of debris and professional fees.

Location: The geographical location of the property can greatly affect insurance premiums. Areas prone to natural disasters such as bushfires, floods, or cyclones might see higher premiums due to the increased risk.

Claims History: The claims history of the strata complex can influence premiums. If the complex has a history of many or large claims or a series of small claims (like water damage), insurers may view it as a higher risk, which can lead to higher premiums.

Construction: Construction of the building will be considered by insurers. Brick and concrete construction get a more favourable premium than buildings with other materials such as timber, cladding or asbestos.

Age of the Building: Older buildings may attract higher premiums due to the higher risk of infrastructure failure or regulation non-compliance.

Building Use: The risk profile changes if the building has commercial spaces, such as shops or restaurants, which can lead to higher premiums due to increased foot traffic and associated risks.

Building Condition and Maintenance: A well-maintained building might lower risk and thus, premiums. Conversely, a building in poor condition or with known issues may be considered a higher risk.

Additional Coverage: Additional cover for office bearers' liability, machinery breakdown, or catastrophe cover will increase the premium.

Deductible/Excess: The amount of money the body corporate is willing to pay out of pocket in the event of a claim (the deductible or excess) can affect premium costs. A higher deductible typically lowers the premium.

The insurance provider will assess all these factors to determine the level of risk and the appropriate premium for the strata insurance policy. Each insurer has its own methods for calculating premiums so that costs can vary between providers. It is often recommended for strata buildings to engage an insurance broker to ensure adequate cover and fair premiums.

Strata insurance provides extensive coverage for shared property and common areas in strata-titled buildings. Still, there are several things it typically does not cover:

Personal Belongings: Individual unit owners or tenants' contents and personal belongings are not covered. This includes furniture, electronics, and other personal items inside a resident's specific unit.

Certain Internal Fixtures and Fittings of Individual Units: Items such as carpets, blinds/curtains, unfixed appliances & aircon units servicing an individual lot (QLD only).

Wear and Tear: Gradual deterioration or wear and tear of the building or common property is not covered. Maintenance issues are also generally excluded.

Lot Owner Liability: Liability for incidents that occur within the individual lots or units are not usually covered under strata insurance. For example, if a visitor slips inside an individual's apartment, that would typically be a matter for the lot owner's personal liability coverage.

Defects and Faulty Workmanship: Problems arising from original construction defects or poor workmanship may be excluded from the policy.

Illegal Activities: Damage related to or resulting from criminal activities is not covered.

Owners' corporations and individual unit owners must understand the exclusions and limitations of their strata insurance policy. For personal belongings and other specific coverages not included in the strata policy, individual owners and tenants should consider additional insurance, such as contents insurance, landlords' insurance, or personal liability insurance. Always refer to the actual policy documents for the specific terms, conditions, and exclusions.

Incident Occurs (Notification to insurer): When an incident that may result in a claim, such as property damage or a public liability issue in the common areas, it should be reported to the insurer as soon as possible.

Documentation: The claimant will need to provide documentation supporting the claim. This could include photographs of the damage, police reports (if applicable), repair quotes, and any other relevant documentation that the insurance company requests.

Insurer's Assessment: The insurance company will review the claim and may send out an assessor or claims adjuster to inspect the damage, determine the cause, and assess the cost of repairs or replacement.

Decision: Once the insurer has assessed the claim, they will decide whether the claim is approved or denied, based on the policy coverage and the circumstances of the claim.

Repair and Restoration: If the claim is approved, the insurance company will typically arrange for repair works to begin with their contractors or may pay the agreed sum to cover the damages.

Payment: The insurance company will settle the claim by either paying the repairer directly (if they have engaged the repairer) or reimbursing body corporate now for the cost of the repairs.

Excess Payment: The body corporate or lot owner will be responsible for paying any applicable excess on the policy, which is the contribution they are required to make towards each claim.

At Strata Insurance Solutions, our primary goal is to streamline the claims process for our clients, minimising the workload for both the strata committee and strata manager. We take the initiative to communicate directly with lot owners, reducing the need for unnecessary involvement from the strata manager or committee. In the absolute majority of cases, the role of the strata manager and committee during a claim should be limited to referring lot owners to us, as we specialise in managing claims directly with lot owners. The strata manager or committee may also need to deal with any payments into and out of the strata bank account, ensuring a smooth financial aspect of the process. Our approach aims to simplify and expedite the claims process, making it more efficient for all parties involved.

In Australia, the choice of the Strata Insurance provider is generally a decision made by the committee. Notwithstanding, individual lot owners can have a say in this process by submitting a motion for consideration at a committee meeting or through their voting rights and participation at a general meeting.

Here's how individual lot owners can have input in selecting the Strata Insurance provider:

Proposals and Quotes: Lot owners can propose insurance providers or request quotes from different insurers to be considered. They may also ask the strata manager or a committee member to gather this information.

Strata Committee: If there is a strata committee, individual owners can express their opinions to committee members, who may then consider these opinions when recommending an insurance provider to the owners' corporation.

Annual General Meeting (AGM): Insurance is typically discussed at the AGM of the owners' corporation. Lot owners can attend this meeting and participate in the discussions regarding selecting an insurance provider.

Voting Rights: Each lot owner has a vote in the decisions made by the owners' corporation, including the choice of insurance provider. A majority vote will often make the decision.

Extraordinary General Meeting (EGM): If necessary, lot owners can request an EGM to discuss the insurance policy if they feel the matter needs urgent attention outside the regular AGM cycle.

Concerns and Suggestions: Owners can raise their concerns, preferences, or suggestions regarding the strata insurance provider or policy at any time with the strata manager or through correspondence with the strata committee.

While individual lot owners can voice their preferences and vote on the decision, the final choice will depend on the collective vote of the committee at committee meetings or owners at a general meeting. It's also worth noting that the Body Corporate or Owners' Corporation is required by law to act in the best interest of all lot owners, which includes due consideration of factors such as the level of cover, the insurer's reputation, the cost of the premium, and the terms and conditions of the policy.