When it comes to Strata Insurance, nothing is as simple as it seems. Lia de Sousa, Whitbread’s General Manager | Strata, explains the cover you need to adequately protect your property and belongings when an unfortunate incident turns into an expensive disaster!
If there’s one thing we’ve learnt from broking Strata Insurance for 40 years, it’s that there’s a lot of confusion about the various types of cover required by people living in strata-titled properties. In short, it’s hard to know where one policy ends and the next begins.
There are 3 different types of insurance policies linked to strata living, but they all cover different aspects of your property. Below, we help clarify the covers you need:
1. Strata Insurance
Strata Insurance – which is compulsory – provides general insurance cover for the building, shared or ‘common’ areas, common property and common contents – basically anything you and your neighbours own collectively, and which comes under the management of an Owners Corporation (OC) or Body Corporate.
Common property includes the building itself, and fixtures which form part of the building structure, such as fixed plant, machinery and underground services, and owners’ fixtures, fittings and improvements which form part of the building e.g. balconies, shared water pipes, sewage pipes and electrical conduits.
If in doubt, your original strata management plan and any subsequent by-law or rule amendments will define what is and isn’t common property.
Common Contents includes any appliances, equipment, furniture, fittings and works of art in common areas for which the OC is responsible.
Public Liability is also covered under Strata Insurance, protecting the OC against third party claims for property damage and personal injury in common areas.
2. Contents Insurance
As far as your personal assets are concerned, the cover afforded by a Strata Insurance policy ends as soon as you cross the threshold of your front door and step into your individual lot.
If you are an Owner-Occupier or tenant in a strata title, you will need to take out a Contents Insurance policy. This policy is designed to protect your personal assets, as well as any associated public liability risks within your home.
Tip: An easy way to visualise the tangible assets you personally need to insure, is to imagine the building being turned upside down and shaken vigorously. Anything that falls out of your lot is your responsibility to insure e.g. clothing, jewellery, furniture and electrical appliances not fixed into the premises.
Internal carpets, light fittings and blinds might not be so easily shaken out, but these items are also included under your Contents Insurance policy, as they do not form part of the building structure.
3. Landlord Insurance
If your strata title property is an investment which you lease, then you need a Landlord Insurance policy.
Landlord Insurance provides cover for the landlord’s fixtures and fittings, including blinds, carpets and light fittings inside the lot. It can also cover rent default and public liability exposures in your capacity as a landlord.
Should the premises become uninhabitable due to contents damage, the Landlord Insurance policy can also extend to cover Loss of Rent.
To put this insurance jargon into context, let’s look at a claims scenario, explaining how each of these policies responds.
Kings Landing is a residential apartment block comprising 30 separate lots. Mrs. Jones, who lives on Level 5, is an Owner-Occupier. She lives directly above Mr. Smith on Level 4, who is renting the apartment from a private landlord, Mrs. Wells.
One day, Mr. Smith returns from work to discover sewage leaking from his ceiling, and his lounge room flooded. It turns out a pipe burst in Mrs. Jones’ apartment, which is causing sewage to seep through the floor and into Mr. Smith’s apartment. Mrs. Jones has extensive damage to her walls, carpets and personal belongings as a result of the burst pipe, as does Mr. Smith.
Mr. Smith, being a tenant, refers the matter immediately to his landlord, Mrs. Wells, informing her that the apartment is uninhabitable until repairs are carried out. Mrs. Wells is concerned that she will be out of pocket for the rent she would have received during the period the repairs are being carried out.
Who is responsible here? Is it Mrs. Jones’ fault because the problem began in her apartment? Is it the OCs’ responsibility as the sewerage pipe formed part of the building structure? Or, does the answer (as it usually does) lie somewhere in the middle?
As the problem occurred in Mrs. Jones’ apartment, Mrs. Jones as an Owner-Occupier would first make a claim under the Strata Insurance policy for the burst sewerage pipe, which is considered Common Property.
The Strata Insurance policy in place for Kings Landing would then respond to cover the repair of the burst sewerage pipe in the Common Area and the repairs of ceilings, walls, etc. for both Mrs. Jones and Mrs. Wells. Mrs. Jones would also make a claim under her Contents policy for the repair and replacement of any contents damaged; this would include damage to carpets.
Mrs. Wells’ structural repairs would be covered under the Strata Insurance policy but she would also need to make a claim under her Landlord policy to repair and replace any carpets, blinds or light fittings damaged.
As the premises has become uninhabitable due to damaged contents, Mrs. Wells’ Landlord policy should respond to cover the rent she will be out of pocket for during the period the premises is uninhabitable.
Mr. Smith would make a claim on his Contents policy to replace and / or repair any of his personal belongings that were damaged.
Strata Insurance isn’t enough on its own.
In summary, Strata Insurance provides critical protection for your home and / or investment property, but is not sufficient by itself.
Had Mrs. Jones and Mrs. Wells wrongly assumed that their contents and / or fixtures and fittings were covered under the Strata Insurance policy, they would have suffered a significant uninsured loss, incurring costs to replace damaged items.
Insurance is complex, and it is rare that one solution fits all situations. Please note, the advice above is general in nature and we strongly recommend you consult a professional insurance broker to ensure your assets are sufficiently protected.
Summary of how each policy responds in the Strata claim example:
Note: The above table applies specifically to the hypothetical situation described in the text. Different circumstances may result in different coverage.
For more information on the policies which can best protect your assets, please contact a Whitbread Strata or Personal Insurance specialist:
T | 1300 424 627
E | firstname.lastname@example.org
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as Whitbread Insurance Brokers for further information or refer to our website.
(i) Typical building contents replacement costs are provided by Sum Insured Pty Ltd (A.B.N. 55 947 630 521 (‘SI’) trading as Home Contents. Whilst every care is taken to ensure the accuracy of the information as a guide for costing, no responsibility is accepted by SI, Steadfast or the Steadfast Broker for its accuracy. Please check with a Valuer or other suitably qualified professional for an accurate estimate. Neither Steadfast nor the Steadfast Broker takes any responsibility for the costs provided by SI, or any liability for the accuracy of or reliance upon or use of, the costs. To the fullest extent permitted by law, SI, Steadfast and the Steadfast Broker expressly disclaim all warranties, express or implied, including, but not limited to, the implied warranty of fitness for a particular purpose. SI, Steadfast and the Steadfast Broker do not warrant or make any representations regarding the use or the results of the use of the information provided in terms of its correctness, accuracy, reliability, or otherwise.