Body Corporate Insurance Explainer

Living in a common titled property like a strata (or battleaxe block) is quite popular. But when it comes to insurance time, many lot owners feel frustrated as they don't understand why the group insurance looks and works differently to the standard home insurance advertised on TV. Not that we'd ever say any direct market insurer as advertised on TV! has an offer you should emulate.

So what are the key differences?

Key differences

1. The insured is the group as a whole, not any individual lot owner personally.
2. The insurance cover is over the entire group assets, not any individual lot.
3. You don't own your own lot, you simply have a right to use it.
4. Accidents or claims can affect more than one lot owner, so you need consensus before you claim or repair.
5. Your body corporate does have by-laws, and those by-laws usually say what the body corporate is responsible for, and what each lot owner is individually responsible for.
6. Your insurer doesn't know what the by-laws say (because they're all different), so you need to find them out first.

What do you mean I don't own my lot?

Most of this boils down to the understanding that in a strata or body corporate, you don't actually own your own unit. What you instead own is a share in a common enterprise (the body corporate), and that share gives you exclusive enjoyment of your lot.

That's why the insurance is in the name of the body corporate, not in your name, and why your bank can't have their name on the insurance or title.

So the outcome of that is that any improvements to your individual lot are your responsibility to maintain and insure, not the body corporate.

The fancy kitchen you installed? You own that, not the body corporate. Even though it's part of the "building", it's your property, not group property, so the group insurance is unlikely to insure any damge to your new kitchen. The group insurance is only for the dowdy kitchen the original builder installed.

Okay, so how much is my unit insured for?

All the sum insured and none of it. The total sum insured is only relevant if the entire strata is destroyed - in that case it needs to be sufficient to fully rebuild / compensate each lot owner for what the rebuilding cost would have been. If there's a partial claim, you effectively have the full sum insured to apply to your loss.

But that said, the strata title regulations in each state say that the unit owners are required to insure the strata property for its full replacement value, so if you want to be compliant, you should regularly review the total sum insured.

Ummm... my unit is worth more than the others

In the next article I'll talk about how lot owners can protect themselves by having improvements insured by the body corporate.

With decades of experience helping strata bodies understand their insurances and maximise their entitlements at claim time, I can help demystify strata insurance and make sure that you're not paying too much.