WA: Q&A What strata insurance do I need?

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We have been asked insurance for a strata property and whether you should get regular comparable quotes. .

Jump directly to the QUESTION you are after:

• QUESTION: How many years ahead does a quote for insurance renewal need to be tabled at an AGM?
• QUESTION: How much should our strata complex be insured for? The current insurance level essentially equates to the value of each unit times the number of units but should risk of damage be taken into account?
• QUESTION: Can you please highlight any specific changes, requirements for insurance where the strata company has mixed use, commercial and residential use.
• QUESTION: I’ve heard there is only one company in WA that will insure Survey Strata groups of units? Is this correct?
• QUESTION: I live in a small strata scheme. I’ve found a cheaper quote with a lower excess. Am I able to insure my unit separately with a different insurer to the other lot owners? What about the common property?
• QUESTION: We have been with the same strata insurance company for 10 years. As a lot owner, do I need approval from the other 3 owners to call insurance companies and gather some comparable quote?
• QUESTION: What insurance do I need for a strata property? We are looking at purchasing a property that is part of strata that was formed pre 1985.

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Question: How many years ahead does a quote for insurance renewal need to be tabled at an AGM?

How many years ahead does a quote for insurance renewal need to be tabled at an AGM?

At our AGM in November 2019 the insurance quote was tabled for the policy commencing in Nov. 2021. Is this standard practise? Are there conditions that make this legally enforceable?

Answer: An Insurance policy renewal is issued for 12 months generally.

An Insurance policy renewal is issued for 12 months generally.

Example:

• Inception date: 1st November 2020
• Expiry Date: 1st November 2021 expiring at 4pm

In respect to any other insurer quotation for the same current covers these are quoted for the same date period, unless the Owners have decided to extend their expiry date generally for financial reasons.

In terms of quote issuance with an inception date commencing beyond 12 months this is unusual and generally would not be honoured by insurer. The normal practice for most insurers is not to issue a quote before 30 days prior to the expiry date, as circumstances relating to that risk can change.

In some cases indication quotes may be issued but this generally only occurs in new developments where budgeting is required.

Quotes generally remain current for 30 days only and any enforceability of that quote is a decision of the insurer, as they reserve the rights to honour a quote issued by them, especially if the quote falls outside of the quoted period.

Leonie Milonas
PSC Property Lync Insurance Brokers
T: 1300 127 503
E: [email protected]

General Disclaimer: This response is prepared for informational purposes only, and is not insurance, financial or legal advice and should not be relied on as insurance, financial, strata or legal ad­vice. You should consult with a qualified strata or legal advisor.

This post appears in Strata News #418.

Question: How much should our strata complex be insured for? The current insurance level essentially equates to the value of each unit times the number of units but should risk of damage be taken into account?

How much should our strata complex be insured for? Should a proper valuation be conducted to determine the risk of damage and the value required to be covered for the risks? The current insurance level essentially equates to the value of each unit times the number of units.

• Our strata complex comprises conjoined 2 storey townhouses
• The complex is a number of separated units in blocks of four and two units

Answer: The requirement in all states around Australia is that the property is insured for full rebuild value

The requirement in all states around Australia is that the property is insured for full rebuild value. The rebuild value can sometimes be more than the sale value of the units, but really when it comes to valuation of the property that really falls within the remit of a professional quantity surveyor. The best way to ensure that you’re comfortable with sum insured is to seek the services of a quantity surveyor to provide a recommendation on the sum insured for that value to make sure that you comply with the legislation.

How often should this be done? In Queensland, it’s every five years. This is a requirement by law. In other states, there’s no requirement by law. In New South Wales, it used to be five years, but that was also repealed in the 2015 legislation.

Really look at the value of the property. That’s a good start. If it’s a huge property with hundreds of lots, you might want to get one every few years because insurers will automatically index the premium by, say, 5% and when you’re dealing with large sums of money, if it’s over indexed, it might mean that there’s a cost benefit in getting more regular valuations. Five years is what we would recommend on properties, but if there’s no legislation obviously, then it really is up to the committee to determine if they’re comfortable with the valuation, and if they’re not, then they should get it re-valued.

We’ve got properties that haven’t had a valuation for 10 or 15 years and the insurers apply to 5% indexation but the actual cost of rebuilding was only ever increased by 1% over those years, and there’s been a major reduction in the sum insured because the valuation has been bought back into line with what the CPI or indexation actually was.

When we are doing a renewal, we look at whether we think it would be beneficial for them to get a valuation. One of the things we do is we keep all of our valuations on record, but whenever we provide a renewal our Statement of Advice specifically talks about valuations and when you should consider them. From our perspective, whenever a client gets one of our documents we actually raise that and remind lot owners of their requirements to get valuations and also just discuss and talk about the fact that you should consider a valuation if you’re not sure about the sum insured.

Tyrone Shandiman
Strata Insurance Solutions
T: 07 3899 5129
E: [email protected]

This post appears in the October 2020 edition of The WA Strata Magazine.

Question: Can you please highlight any specific changes, requirements for insurance where the strata company has mixed use, commercial and residential use.

Can you please highlight any specific changes, requirements for insurance where the strata company has mixed use, commercial and residential use, i.e. can we hold a joint policy, for instance, or require separate ones for commercial residential areas of common property.

Answer: Within the act, from my understanding, it doesn’t actually differentiate like that.

Within the act, from my understanding, it doesn’t actually differentiate like that.

Insurances comes under two areas. Section 97 required insurance, and another section for specifically single tier insurance. So if you read through what the Act requires, it just basically states that you must insure for the replacement value for your insurable assets and obviously, for public liability insurance. It doesn’t provide a difference between mixed use commercial or residential, other than when it comes to things like internals like proprietors, fixings and things like that. Commercial is a little bit different.

The question really is around can something different be done with the insurance arrangements. There are a mixture of different arrangements that we can do, and brokers around the country can do. It really just depends on the specific circumstances of that scheme as to what we can do.

Leonie Milonas
PSC Property Lync Insurance Brokers
T: 1300 127 503
E: [email protected]

This post appears in Strata News #410.

Question: I’ve heard there is only one company in WA that will insure Survey Strata groups of units? Is this correct?

Answer: There is a small number of insurers who will consider insurance for Survey Stratas Community Property (CP).

This is incorrect. There is a small number of insurers who will consider insurance for Survey Stratas Community Property (CP). However, where the individual Lot buildings (some or all) are also insured, this also changes what insurance options are available to you.

You would need to seek insurance advice on what options are available to you.

Leonie Milonas
PSC Property Lync Insurance Brokers
T: 1300 127 503
E: [email protected]

This post appears in Strata News #380.

Question: I live in a small strata scheme. I’ve found a cheaper quote with a lower excess. Am I able to insure my unit separately with a different insurer to the other lot owners? What about the common property?

I am an owner/occupier in a group of 4 on a Strata Plan in Perth, Western Australia. The units were built in 2008, they have a common driveway with units 2, 3 and 4 and each unit as adjoined to one another with a common cavity wall. The group has always been insured through a broker and I have always found the policy to be high compared to what I used to pay for a much larger home a few years earlier.

We also pay a $500 excess which I strongly object to. I have obtained a quote from a local WA insurer that comes out approx $600 cheaper with the same excess or $431 cheaper with a $200 excess. I have communicated this with the other 3 three owners, one is owned by Community Housing. To my astonishment, the two other private owners do not want to change.

This same insurer said I can insure my property separately. It will be more expensive but at least I don’t have to deal with the other owners and my excess will be much cheaper. But is this possible? Am I able to insure my unit separately with a different insurer and what about the common property?

Answer: By having strata insurance, it means that at all times you have consistent insurance in place, both for your home unit and common property areas.

In answering this question, I have assumed your strata scheme falls under built strata – Lots in Single Tier Schemes and not a Survey Strata Scheme. As my response would be different for each scheme type.

Lots in single tier schemes come under Schedule 2A Part 5 cl.53A – 53E and where applicable Required Insurance S97 of the Strata Titles Act 1985 as amended in 2018.

A strata under cl.53B(2) it states strata company may determine by ordinary resolution agree to insure in respect to matters as referred in the subclause (1) and at any time by ordinary resolution revoke that determination.

Please refer to the following reference links:

• Strata Titles Act 1985 as amended in 2018
• Landgate Guide to Strata Titles

It is not advisable to double insure your property as if you try to make a claim, technically you would be involving 2 insurers and this would make your claim complicated. I am unable to comment on the insurance quotes you have obtained, however, what is really important is to ensure the insurers you have obtained quotes with are like for like and similar in sum insured value.

Generally, strata insurance is a very broad cover, providing for accidental damage, not otherwise excluded by their exclusions. It also comes with other additional covers, which relates to unique strata risk exposures. As far excesses are concerned, some strata insurers do offer lower excesses in some cases. Further by having strata insurance, it means that at all times you have consistent insurance in place, both for your home unit and common property areas, such as your driveways, fencing and all undergrounds services, which are normally connected. Single home insurance may miss these important areas out of their quote and you would need to verify this with them.

Leonie Milonas
PSC Property Lync Insurance Brokers
T: 1300 127 503
E: [email protected]

This post appears in Strata News #377.

Question: We have been with the same strata insurance company for 10 years. As a lot owner, do I need approval from the other 3 owners to call insurance companies and gather some comparable quote?

We pay over $3500 per year for strata insurance. As a lot owner, should I be able to get approval from the other 3 owners to call insurance companies for a few comparable quote? We have been with the same insurance company for 10 years and have never compared prices or asked for a reduction in premiums.

Answer: Not all strata insurance products are the same and therefore it’s important when applying for quotes that you have some understanding on how to compare these policies.

From your question, I assume your strata scheme is a 4 Lot single-tier scheme. This means the requirement to insure is found in the Strata Titles Act 1985 as amended by Strata Titles Amendment Act 2018 (STA), under Schedule 2A Part 5 – Insurance for lots in single tier strata scheme.

I don’t know if you are self-managed and whether you have any elected office bearers or not, as normally insurance is a delegated function for the office bearers to arrange. Generally for small schemes and with elected council members, you may attend a general meeting, and as 4 owners decide important matters for the strata company, such as insurance.

Insurance is usually one of your major expenditure items and obtaining alternative quotes is prudent, so that you can check the competitiveness of your current insurance policy, but at the same time, it is important to understand the cover that applies to your quotes as well. Not all strata insurance products are the same and therefore it’s important when applying for quotes that you have some understanding on how to compare these policies, along with the quote.

In WA there are a number of specialist strata insurance brokers, who can do this for you, or otherwise, you can do it yourself, as long as you line up all the policies you are obtaining other quotes from and ensure your covered items are similar.

This post appears in Strata News #356.

Question: What insurance do I need for a strata property? We are looking at purchasing a property that is part of strata that was formed pre 1985.

We are looking at purchasing a property that is part of strata that was formed pre 1985.

There are 2 houses on the block and we understand we only own 100% of the house and 50% of the surroundings.

I’m confused. What insurance do I need for a strata property?

Also, what are we liable for? e.g. neighbours fence blows over, tree on their property falls down, they fall over a tree root and injure themselves etc.

Are we able to access their property as we own half of it and vice versa?

I would appreciate any advice you can give as we know nothing about this type of strata and need to be clear before we purchase this house.

Answer: This depends on whether it is a Survey Strata you’re purchasing or strata single tier.

The answer depends on whether this is a Survey Strata you’re purchasing or strata single tier.

If it’s Single Tier pre-1985 strata plan, then the back and front yards are likely to be common property and this includes any structures, like garden sheds or carports etc. Without the strata plan, it’s difficult to comment.

In terms of insurance, if it is a single-tier pre-1985 with back and front yards as common property, you’re best to purchase strata insurance, which then also includes common property insurance including legal liability insurance.

As far as access to yards etc. again it depends on the strata plan and further whether an automatic merger has occurred and if that did or didn’t extend to the yards. Older schemes most yards are common property pre-1985.

I would advise you to speak to a consultant about the strata plan boundaries as this will answer your question specifically. Landgate may be able to assist the boundary question specifically in this instance as well.

Leonie Milonas
PSC Property Lync Insurance Brokers
T: 1300 127 503
E: [email protected]

This post appears in Strata News #195.

Have a question about your insurance needs for a strata property or something to add to the article? Leave a comment below.

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General Advice Warning
This advice has been prepared without taking into account the client’s objectives, financial situation or needs. Because of that, before acting on the above advice, the client should consider its appropriateness (having regard to their objectives, needs, and financial situation). The above is a general response only to questions asked, not taking into account personal circumstances and is not legal advice. If the advice is related to the acquisition of an insurance contract, the client should obtain a Product Disclosure Statement relating to the product before deciding whether to acquire it.

Please note that parts of this article were provided prior to the proclamation of the new strata title amendments and will be updated in due course.

Read next:

• WA: Q&A We can’t agree on a strata insurance company
• WA: Q&A Strata Insurance for common driveway

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