This question about mechanical breakdown insurance for a strata scheme in Victoria has been answered by Simon Plummer, StrataRatings.
Question: Although we don’t have any lifts or elevators just an electronic gate, we have been told we need mechanical breakdown insurance as part of our policy renewal.
We are a set of townhouses in Victoria and our Owners Corporation Manager told us one year we did not need mechanical breakdown insurance and the next year said we needed $60,000 coverage which means an increase in premium – thus more OCM commission..
As we are individual townhouses, we only have an electronic gate. We have no lifts or escalators so we cannot see why we need this mechanical breakdown insurance in our insurance policy. The electronic gates motor was recently replaced at $2000 and is under a service contract.
We have garage doors and split air conditioners attached to each individual unit – which we believe would be lot owners expense.
We contacted our insurance company but were told to talk to the OCM so we would appreciate some independent advice.
Answer: The decision to take out certain cover lies with the owners corporation, not the Owners Corporation Manager.
Firstly, keep in mind that your OCM is the owners’ corporations agent and the committee may instruct them to take certain action, not the other way around.
Insurers do prefer to receive requests from OCMs as they need to make sure the request is legitimate and not just from one committee member. As the OCM generally has the authority to make changes such as including mechanical breakdown insurance, the insurer can accept their instruction much more readily.
This doesn’t mean committee members cannot phone the insurer to ask questions, however.
The decision to take out certain cover such as mechanical breakdown insurance lies with the owners corporation.
If the owners corporation does not see it as a necessary cover, they can instruct the OCM to have the insurer remove it.
Most major policies include an amount of cover for the fusion of small electric motors without the need to purchase machinery breakdown cover. Many schemes that do not have significant machinery rely on this benefit to provide some protection for the fusion of small motors contained in gates and air-conditioners.
It certainly pays to have a read of this benefit and the mechanical breakdown insurance cover to determine which one is suitable for your scheme.
If you are still unsure after reading, professional advice can be sought. To avoid a conflict of interest, have a look for a fixed fee broker. This will avoid the financial conflict a commission-based broker may have.
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StrataRatings is Australia’s first and most respected strata insurance evaluator. As a pioneer in the strata insurance industry, StrataRatings was established to close the information divide between insurers and strata schemes and to cut through the complexities of Australia’s strata insurance industry.
This post appears in Strata News #243.
Please note that the above is not intended to provide advice of any type and merely discusses the issues raised broadly. Professional assistance should be sought should you require advice.
- Owners Corporation Insurance Requirements Victoria
- VIC: Q&A Individual Strata Insurance for a Small Owners Corporation
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