Do You Live in a Strata Property? 3 Insurance covers that make common sense
This article discussing strata insurance coverage has been supplied by Lia De Sousa, Whitbread Insurance Brokers.
When it comes to insurance – like everything else in strata living – nothing is a simple as it seems. Lia De Sousa, General Manager (Strata) at Whitbread Insurance Brokers leads us through the kind of potential minefield that can turn an unfortunate incident into an expensive disaster.
If there’s one thing we’ve learnt from broking insurance over the last 36 years, it’s there’s a lot of confusion in the market about the various types of cover required by people who live in strata titled properties. In short, it’s hard to know where one policy ends and the next begins.
There are three basic types of insurance policies linked to strata living but they all cover different aspects of your home and what you have in it. Lia explains what you might need and when, below.
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 Owner Corporation (or Body Corporate).
Common Property includes 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, such as 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 Owners Corporation is responsible. Strata Insurance also provides cover for the legal liability of the Owners Corporation.
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 then you will need to take out a Contents Insurance policy to protect your personal assets as well as the personal liability associated with your home.
An easy way to visualise the tangible assets you need to personally 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; 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 will 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 for 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 information into context, let’s take a look at a claims scenario and step through 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 has 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.
So, who is responsible here? Is it Mrs. Jones’ fault because the problem began in her apartment? Is it the Owners Corporations’ responsibility as the sewage 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 firstly make a claim under the Strata Insurance policy for the burst sewerage pipe, which is Common Property.
The Strata Insurance policy in place for Whitbread Towers 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 have become uninhabitable due to damage to contents, Mrs. Wells’ Landlord policy should respond to cover the rent she will be out of pocket for during the period the tenanted 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.
How the policies respond in this Strata Claims situation:
|Strata Insurance policy||Contents Insurance policy||Landlord Insurance policy|
|Mrs. Jones (Owner Occupier)||Not applicable|
|Mrs. Wells (Landlord)||Not applicable|
|Mr. Smith (Tenant)||Not applicable||Not applicable|
*The table above applies specifically to the hypothetical situation described in the text. Different circumstances may result in different coverage.
Strata Insurance provides critical protection for your home and/or investment property, but it is not enough on its own.
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 and incurred costs to replace damaged items.
Insurance can be complex and it is rare that one solution fits all situations.
The advice above is general in nature and we strongly recommend you consult a professional insurance broker to ensure your assets are sufficiently protected.
For further advice specific to your situation, please contact Whitbread Insurance Brokers Ph. 1300 424 627.
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 Licence Number: 229092 trading as Whitbread Insurance Brokers for further information or refer to our website – www.whitbread.com.au or contact us on 1300 424 627.
Are you interested in more information about strata insurance coverage? Visit our FactSheet: Strata Insurance