However, owning a property under a strata scheme implies that there are certain common risks involved. Regardless of whether you are the owner of an apartment, townhouse, duplex or commercial unit located in a strata titled building, knowing about the strata insurance becomes an absolute necessity. Most people believe that having a comprehensive insurance policy is sufficient for their properties; however, there are situations where it proves otherwise.
Therefore, the question arises: What is strata insurance all about?
Here is a detailed strata insurance guide on everything property owners need to know about strata insurance in Australia.
What Is Strata Insurance?
Strata insurance is a form of insurance coverage which is provided to those properties which belong to a strata title system. Strata insurance can be arranged by the Owners’ Corporation which is alternatively referred to as the Body Corporate.
In most Australian states and territories, strata insurance is a legal requirement for residential strata properties. The policy is paid for collectively through strata levies contributed by all lot owners.
The purpose of strata insurance is to protect the building and shared areas from financial loss resulting from unexpected events such as storms, fire, vandalism, or liability claims.
What Does Strata Insurance Typically Cover?
1. Building Insurance
One of the primary components of strata insurance is building cover.
This typically includes:
- ● External walls
- ● Roofs and ceilings
- ● Floors and foundations
- ● Shared infrastructure
- ● Windows and doors
- ● Garages and carports
- ● Balconies
- ● Lifts and stairwells
If the building is damaged by an insured event such as fire, storm, lightning, impact damage, or vandalism, the policy can help cover repair or rebuilding costs.
Many strata policies also cover replacement costs, ensuring the building can be restored to its original condition after a major loss.
2. Common Property Cover
Common property refers to areas shared by all owners within the strata scheme.
Examples include:
- ● Hallways
- ● Driveways
- ● Gardens and landscaping
- ● Swimming pools
- ● Gyms
- ● Shared recreational facilities
- ● Fences
- ● Security systems
Damage to these shared areas can be expensive to repair. Strata insurance helps ensure the Owners Corporation has the financial resources to restore common property when unexpected incidents occur.
3. Public Liability Insurance
The public liability component is the most vital part of any strata insurance policy.
In case of any injuries sustained by any person (visitor, contractor, occupier, or resident) at common areas and where the Owners Corporation is held to be responsible, the policy can provide:
- ● Legal defence costs
- ● Compensation payments
- ● Medical expenses awarded by a court
For example, if a visitor slips on a wet staircase in a common area and suffers an injury, the Owners Corporation may face a liability claim. Public liability insurance helps protect against the financial consequences of such incidents.
4. Catastrophe and Natural Disaster Cover
Australia is exposed to various natural disasters, including:
- ● Storms
- ● Hail
- ● Floods
- ● Cyclones
- ● Bushfires
Most strata insurance policies provide protection against many natural disaster-related events. Given the increasing frequency of extreme weather events across Australia, having adequate catastrophe cover is becoming increasingly important for strata property owners.
It is essential to review policy terms carefully, as coverage limits, exclusions, and flood definitions may vary between insurers.
5. Temporary Accommodation Costs
If an insured event renders a property uninhabitable, strata insurance may provide temporary accommodation benefits for residents.
For example, if a major fire damages an apartment building and residents cannot safely occupy their units while repairs are underway, the policy may assist with alternative accommodation expenses, subject to policy conditions.
6. Office Bearers Liability
Members of an Owners Corporation committee often make decisions on behalf of all owners.
Office bearers liability insurance can provide protection if committee members are accused of:
- ● Negligence
- ● Breach of duty
- ● Errors in decision-making
- ● Mismanagement of strata affairs
This cover helps protect committee members from personal financial exposure arising from claims related to their official duties.
7. Fidelity Guarantee Cover
Unfortunately, fraud and theft can occur within strata schemes.
Fidelity guarantee insurance may provide protection against financial losses caused by:
- ● Fraudulent acts
- ● Theft of funds
- ● Misappropriation of strata money
This cover can be particularly valuable where substantial maintenance funds or sinking funds are managed on behalf of property owners.
8. Machinery Breakdown Cover
Many strata buildings contain mechanical equipment such as:
- ● Lifts
- ● Air-conditioning systems
- ● Automatic gates
- ● Pumps
- ● Security systems
Machinery breakdown cover can assist with repair or replacement costs if critical equipment suffers sudden and unexpected mechanical failure.
What Is Not Usually Covered by Strata Insurance?
While strata insurance provides broad protection, there are certain items that are generally not covered.
Contents Inside Individual Units
Strata insurance usually does not cover personal belongings owned by residents.
Examples include:
- ● Furniture
- ● Clothing
- ● Electronics
- ● Appliances
- ● Jewellery
Owners and tenants should consider separate contents insurance to protect their personal possessions.
Internal Improvements and Renovations
Coverage can vary when it comes to improvements made within individual lots.
Examples include:
- ● Custom kitchens
- ● Premium flooring
- ● Built-in cabinetry
- ● Renovated bathrooms
Some strata policies provide limited cover for these improvements, while others may require owners to arrange additional insurance.
Tenant Belongings
If a unit is rented, the tenant’s personal belongings are generally not covered under the strata policy. Tenants should arrange their own contents insurance.
General Maintenance Issues
Insurance is designed to cover sudden and unforeseen events.
It generally does not cover:
- ● Wear and tear
- ● Deterioration over time
- ● Poor workmanship
- ● Lack of maintenance
- ● Existing defects
Regular maintenance remains the responsibility of the Owners Corporation and property owners.
Why Adequate Strata Insurance Matters
Underinsurance is one of the biggest risks facing strata property owners today.
Construction costs, labour expenses, and building material prices have increased significantly across Australia in recent years. If the building is insured for less than its full replacement value, owners may face substantial out-of-pocket expenses following a major claim.
Regular insurance reviews and professional building valuations can help ensure adequate coverage levels are maintained.
How Property Owners Can Protect Themselves
Even when a strata insurance policy is in place, individual property owners should:
- ● Review the Owners Corporation insurance policy annually.
- ● Understand exactly what is covered.
- ● Arrange contents insurance if required.
- ● Consider landlord insurance if renting out the property.
- ● Check whether renovations or upgrades need additional cover.
- ● Discuss insurance requirements with an experienced insurance broker.
Conclusion
Strata insurance is an essential tool for safeguarding property owners, tenants, and Owners Corporations from possible financial losses which could be substantial. Whether it’s building damage, public liability claims, natural disasters, or the cost of repairing common property, there is a necessity for a suitable strata insurance policy.
Yet, different policies mean different coverage options, and knowing what they are may assist property owners in making appropriate choices when it comes to insurance coverage and avoiding unpleasant situations at the time of making a claim.
With us at Auswide Insurance Brokers, property owners, strata managers, and Owners Corporations can receive help in finding a tailored strata insurance policy meeting their needs. We can help assess your insurance requirements and any gaps in the existing insurance coverages.