Strata insurance: what is it and who can claim
Accidents happen, even to the most careful of us—a tree damages your roof in a storm, a visitor falls in your driveway and breaks their ankle.
If you’re a strata owner, and the roof (or driveway!) belong to the owners as a whole, who’s responsible for the clean up and the costs associated? That’s where strata insurance comes in.
What is strata insurance?
Residential strata insurance is insurance that covers the common property of a strata title property. This could include car parks, shared driveways, roofs, exterior and interior walls, lifts and other shared areas. It also covers the fixed parts of your unit, including kitchens and bathrooms, although there are exceptions to this if you upgrade — we’ll discuss those later.
Strata insurance also covers public liability for people working onsite or visiting the property. If your owners’ corporation decides to repaint the exterior of the building and the painter is injured, your strata insurance should cover the costs of a claim.
If you own strata property, you should have strata insurance. That’s not us telling you: it’s the Units Title Management Act 2011. The insurance premium cost is divided between the owners and is included as part of your strata fees.
“Strata insurance isn’t a nice-to-have,” explains Ken Nichols, Head of Strata Management at Independent. “It’s a compulsory part of being a strata owner. Strata works well when everyone works together to look after the property. If you had a situation where only a few owners paid insurance premiums, what happens if the elevator breaks or the lobby floods? Should everyone get the benefit of the insurance pay out? It only works if everyone joins in, so the law makes it non-optional.”
What your insurance does and does not cover will depend on the policy. It also depends on where you are, as strata laws differ between states and territories.
What’s the difference between building, contents and strata insurance?
Building insurance is designed to cover permanent structures. If you own a free standing home, building insurance covers it. The same goes for a garage or a granny flat. If you own strata property, you are unlikely to need to take out building insurance on top of strata insurance.
Contents insurance covers the detachable things inside your unit — furniture, clothes, electronics, artworks and anything else that can be picked up and removed. If you’re living in strata property, you should take out contents insurance just as you would if you lived in a free standing property.
You should also check that your strata insurance covers everything you think it does.
“If you add things into the original unit, like a built-in-robe, new air conditioner or an upgraded kitchen, they might not be covered by strata insurance either,” warns Ken. “Check with your strata management to see what the policy covers and doesn’t cover. If it doesn’t cover those things, you may need to make sure your contents cover will fill in the gaps.”
Claims commonly covered by strata insurance
Strata Insurance policies are a typically defined as a broad spectrum policy. While your strata insurance policy may not specify what is covered (like your car or content policy might), it will explain the exclusions in your policy, showing what is not covered. The list below outlines strata insurance claims that are commonly accepted.
- Impact damage
- Water damage
- Accidental damage
- Malicious damage
- Fire damage
- Storm damage
There are also some uncommon claims made that have been covered by insurance, including:
- Flood. These events don’t occur often.
- Cleaning of a unit following removal of a cadaver
- Repairs following forced entry from emergency services (police, ambulance etc.)
What doesn’t strata insurance cover me for?
Every insurance policy has exclusions. Remember the movie The Man Who Sued God? Billy Connelly’s boat is hit by lightning and the claim denied by insurance as ‘an act of God’.
While suing God might seem like a fair way to spend a day, it’s faster and easier to check your insurance cover ahead of time. Understand what your policy does and doesn't cover, and you’ll save yourself a nasty shock if an accident does happen.
“The big one that catches people out is building defects,” says Ken. “A claim that arises from a known defect, such as leaking roofs from poor workmanship, is almost always going to be denied. The insurance company says, well, why should we pay for something that was already broken? That’s why it’s important to keep on top of the building’s condition and fix it as soon as you know there’s a problem.”
Strata insurance also doesn’t cover you for things generally covered by contents insurance—so things that weren’t there before you moved in, such as furniture and some appliances.
How much does strata insurance cost?
Your insurance premium will depend on:
- Where in the country you are — cyclone-prone or flood risk areas are riskier for insurers so they increase the premiums
- The age and condition of the building, including any known existing defects
- The purpose of the building — if a high proportion of the units are used for Airbnb rental, it might bump up the cost compared to owner-occupied complexes
- The types of common property it covers, with swimming pools and gyms increasing the price compared to a bare-bones complex
It also depends on the level of excess you’ll pay with each claim. “The higher the excess, the lower the premium. That sounds good to owners until they hit their first claim. Then they might find themselves up for more money than they intended,” says Ken.
His advice? “Sit down with your strata manager and work out what the likely risks are and how much it would cost you to repair the damage if any of those things occur. If it’s not much more than the excess, you might want to lower it.”
Who can claim against strata insurance?
So what happens if it’s your unit that springs a leak from the hot water unit?
First things first, get in touch with the strata manager. “We know the policy back to front, so we’ll be able to tell you whether the problem is covered and how to claim. Sometimes, it might be just as cheap for the owners corporation to pay for the repairs out of pocket so that we keep the premiums down.”
The building insurance excess is the responsibility of the owners’ corporation unless the responsibility has been passed to the unit owner through a regulation made under section 100 (3(a)).
For this reason, some executive committees may offer for the damages be paid for directly by the owners’ corporation rather than going through insurance. However, they can’t block a claim made by a member of the owners corporation.
“If the executive committee refuses to make a claim or to pay for the damage themselves, you have the right to go directly to the insurer or broker and make the claim yourself,” says Ken.
If you want to find out more about what your insurance covers, or how to make a claim, get in touch with your strata manager.
*Independent is not a financial advisor. The information contained is for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before making any commitment of a legal or financial nature you should consider the appropriateness of the information having regard to your circumstances and needs and seek advice from a legal practitioner or financial or investment adviser.
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Current owners please contact your Strata Manager. Our after hours phone line is contactable from 7am-10pm on weekdays and 8am-10pm on weekends.