Question: Can a strata company insure parts of the building owned by individual lot owners rather than common property?
In our WA strata scheme, the lot boundaries are defined by the external surfaces of the walls and roof, rather than the internal surfaces. This means those parts of the building structure are individually owned, not common property. Can the strata company legally insure those parts of the building, given that property normally cannot be insured by a party that does not own it or have a financial interest in it?
Answer: A single comprehensive policy arranged by the strata company ensures the entire structure is adequately protected, avoids gaps in cover, and facilitates straightforward claims management.
In relation to the strata company’s obligation to insure, under the Strata Titles Act 1985 (WA), the strata company is required to insure all buildings in the scheme, not just the common property. Section 97 of the Act imposes this obligation, provided the buildings fall within the definition of “insurable assets”, regardless of whether those buildings are common property or form part of an individual lot.
In relation to the insurable interest point, while it is commonly said that a party cannot insure something it does not own or have a financial interest in, most strata insurance policies are specifically structured to insure on behalf of both the strata company and the individual lot owners. The definition of “insured” in these policies usually includes the strata company and all lot owners in respect of their respective interests. Therefore, when a building forming part of a lot is insured, the strata company insures it on behalf of the owner, and the policy thus insures parties with a legal or financial interest in the insured property.
The intent of the legislation requiring the strata company to insure the entire building, including buildings that form part of individual lots, is based on the reality that insurers generally will not insure only part of a building. This is particularly the case when structural elements such as foundations, shared walls, and roofing are interconnected, making it impractical and commercially unviable to insure individual portions of a building within a strata scheme. A single comprehensive policy arranged by the strata company ensures the entire structure is adequately protected, avoids gaps in cover, and facilitates straightforward claims management.
In summary, the strata company is required to insure all insurable buildings within the scheme, even if they are wholly contained within a lot. The insurance is arranged on behalf of the lot owners and the strata company, satisfying the requirement for insurable interest, while ensuring the practical and financial viability of insuring buildings in a shared environment.
This post appears in the September 2025 edition of The WA Strata Magazine.
Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165
This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.