This article relates to owners corporation insurance requirements Victoria.
Strata and body corporate insurance requirements can be a confusing beast, so it is always recommended that an owners corporation seek professional advice.
The Owner Corporation Act 2006 specifically excludes carpet and temporary floor, wall and ceiling coverings from the owners corporation insurance, so owners should insure these items in addition to their other contents. (Section 54) Individuals owners need to make sure they have the right amount of contents and public liability cover in place for their lot.
The Owners Corporation Act 2006 sets out the minimum insurance requirements.
The minimum insurance required for an owners corporation is:
- reinstatement and replacement insurance of buildings on common property
- public liability insurance for the common property. Public liability insurance protects owners in the case of unexpected damage and injuries on the common property
Owners of two lot subdivisions are exempt from reinstatement and replacement insurance as well as public liability insurance. It is strongly recommended that owners of two lot subdivisions insure the buildings and have public liability to avoid legal and financial liability.http://minimum
Reinstatement and replacement insurance (Section 59)
All owners corporations, except two-lot subdivisions, must take out reinstatement and replacement insurance for all buildings on the common property.
A building is defined as:
- a structure and part of a building or structure
- walls, out-buildings, service installations and other things attached to the main structure
- any pipes or cables used to provide services to a party other than the owners corporation or its members (shared services)
- a boat or a pontoon permanently moored or fixed to land.
Reinstatement and replacement insurance is simply cover that insures a property on a ‘new for old’ basis. In the event of loss, the insurer will pay the cost of replacing the property or restoring the damage.
The reinstatement and replacement insurance must cover:
- replacement, repair and rebuilding of the damaged property
- costs of demolishing and removing debris from the site
- other costs such as employing an architect or surveyor
- shared services (pipes and cables to provide services including water, electricity, gas and telecommunications)
- replacement of services and structures such as driveways and fences.
There are many elements to factor into the owners corporation insurance requirements. It’s important to note that the total sum insured must include building specific items, like heritage requirements, and allowances for year on year increases that include construction costs and improvements to the common property.
The owners corporation has an obligation to ensure that the sum insured is more than the value of the buildings.
Owners Corporation Insurance Valuations (Section 65)
An owners corporation should obtain valuations of the buildings it is required to insure. A prescribed owners corporation must:
- obtain a valuation every five years of all buildings that it is required to insure
- present the valuer’s report at the next general meeting.
A regular check-up of owners corporation insurance, say every three years, that includes obtaining a valuation from a qualified valuer will ensure that the owners corporations responsibilities are met and reduces the risk of financial loss.
Public liability insurance (Section 60)
Public liability insurance covers your owners corporation’s liability to pay compensation in the case of any:
- injury, illness or death of a person
- damage or loss of property.
Owners corporations with common property, except two-lot subdivisions, must have public liability insurance of not less than $10 million for the common property.
Some owners corporations have lots with different uses (for example, residences and shops), which can mean significant differences in risk. Your owners corporation should get professional advice about its level of risk.
Insurance for multi-storey developments (Section 61)
An owners corporation must take out both reinstatement and replacement insurance and public liability insurance for all lots in a multi-storey development if any of the lots are:
- above or below another lot
- above or below common property.
This is not the case when:
- the lots are actually single-storey, such as multi-storey plans that define the space above and below the lots as common property
- the multi-storey development was registered under the Strata Titles Act 1967 or Cluster Titles Act 1974 and does not have lots above or below one another.
Other insurance (Section 62)
Your owners corporation can, by ordinary resolution at a general meeting, decide to take out any extra insurance that it considers important to safeguard the interests of its lot owners.
This extra insurance might cover:
- Office bearers’ legal liability
- Voluntary workers insurance (a form of personal accident cover)
- Workers compensation
- Fidelity guarantee
- Machinery breakdown (including air conditioning and heating units)
- Catastrophe insurance
- Lot owners’ improvements to the building
- Legal defence expenses
- Government audit costs
- Appeal expenses
- Common property contents (for items such as carpet and paintings in foyers)
Additional insurance should always be on the agenda and considered at the annual general meeting.
Insurance for individual lot owners (Section 55)
Individual lots owners can take out their own insurance cover in regard to destruction of or damage to their lot or their interest in the common property. This can be separate to or over and above the insurance provided by the owners corporation.