ComplianceFor any strata titled building in Australia it’s compulsory to have insurance that complies with the Body Corporate and Community Management Act 1997.
Whether it’s residential, commercial, retail, mixed use, serviced apartments, retirement village, caravan park or resort, it’s important you have the right insurance program.
Below is a basic overview of the types of policy sections available in the market, and what some of the insurance terminology actually means.
BuildingAs defined by legislation, the cover for your building under a strata policy also includes the following:
- Outbuildings – such as a pool house or undercover BBQ area;
- Fixtures & Structural Improvements – such as fences, gates, paths, retaining walls and external blinds, awnings and signs;
- In-ground swimming pools, spas and tennis courts;
- Marinas, wharves, jetties, docks, pontoons, swimming platforms, or similar type facilities (whether fixed or floating);
- Underground and overhead services;
- Floor coverings excluding carpets (whether fixed or unfixed);
- Satellite dishes, radio, television and other antennas including their associated wiring, masts, footings, foundations, moorings and towers;
Common Area Contents
This covers items owned by the body corporate and includes (but is not limited to) the following:
- furniture, furnishings, household goods, light fittings, internal blinds, curtains, fire extinguishers and the like;
- freestanding appliances such as refrigerators, freezers, washing machines and dryers, other electrical items;
- carpets (whether fixed or unfixed) and floor rugs;
- swimming pools or spas that are not in-ground including their covers and accessories;
- wheelchairs, garden equipment including lawn mowers, golf carts, golf buggies or other similar type items but only if such item is not required to be registered;
Air Conditioning Units
Any mobile or fixed air conditioning unit servicing an individual lot in Queensland is the unit owners responsibility to insure under their contents policy.
The only air conditioning units covered under the body corporate policy are one’s servicing multiple units, such as a ducted system in a high rise complex.
This means engineered, laminated, veneered or similar (prefinished) type flooring not fixed or attached to the subfloor but held in position by its own weight and/or skirting boards at perimeter walls. Because the floor isn’t actually fixed or glued down, these floors should be covered under the unit owners contents policy. However, there are some underwriters that now offer this cover under a body corporate policy, but charge to include it.
Lot Owners - Fixtures and Improvements
This covers accidental loss or damage to any fixture or structural improvement installed by a Lot Owner for their exclusive use and which is permanently attached to or fixed to the property.
Sometimes these improvements are not included in the building valuation, so this is an important cover to have.
In 2012 the Federal Government and the Insurance Council of Australia introduced a standard definition of flood to insurance contracts. (Media Release)The definition of flood is: the covering of normally dry land by water that has escaped or been released from the normal confines of:
- any lake, or any river, creek or other natural watercourse, whether or not altered or modified; or
- any reservoir, canal, or dam.
Not all insurance companies offer flood, so it’s important to check your policy.
As a known event on it’s own, most policies will specifically exclude this cover.
However if the storm surge is a result of a cyclone or tsunami, you’ll generally find that your insurer will extend to cover this.
It’s important to check your Product Disclosure Statement (PDS) to confirm exactly what insurance protection you have.
In the event of a catastrophic event such as a Cyclone or Flood, the cost of labour and materials increases due to “supply & demand”.
So it’s important that you consider whether you need this additional cover, as your current building sum insured may not be enough.
This will cover any personal injury or property damage claims (including plaintiff’s legal costs) brought against the body corporate.
Your insurance company will also cover the defence costs, so the body corporate shouldn’t be out of pocket more than the policy excess.
This section of cover provides compensation for loss of income to a person, or their estate, when they sustain bodily injury whilst voluntarily working on behalf of the Body Corporate.
The injured party would also need to provide proof of income and confirmation that the work they are performing is unpaid.
Provides protection against fraudulent misappropriation of Body Corporate funds. Please be aware that most policies require that the loss is discovered within 12 months, otherwise it will be excluded.
Office Bearers Legal Liability
Protects office bearers and committee members against legal liability to pay compensation for wrongful acts, errors or omissions in carrying out their duties. This cover is becoming one of the more common requirements under a body corporate policy due to the litigious nature of the Australian environment.
Provides protection against unforeseen damage to Body Corporate machinery.
Typically it’s not worth insuring small motors because the excess exceeds the repair cost, but for items such as lift motors, pool motors, standby generators and large air conditioners, it may be beneficial.
However you should take into account if a maintenance agreement is already in place, and what this covers, and also be aware that all policies have exclusions for wear, tear and gradual deterioration.
Government Audit Costs, Health & Safety Breaches & Legal Expenses
Most of the insurance companies now include these covers as standard under their policies, and they are a great addition to the policy.
- The audit costs will cover you for any professional fees the body corporate incurs in supplying the auditor with the necessary paperwork.
- If the body corporate is issued with a breach notice regarding workplace, occupational health, safety or similar legislation, this will cover the appeal expenses up to a certain value.
- The legal defence expenses cover pays for the costs of litigation surrounding the misconduct of the body corporate, or dispute with any current, former or prospective employee.
Each insurer has a slightly different wording regarding this insurance, so it’s important to read the Product Disclosure Statement (PDS).
Please be advised that the above information should only be used as a guide when researching your insurance.
You need to refer to the individual policy wordings, which are available on this website.
Strata Community Australia
Strata Community Australia (Qld) Limited (SCA Qld) is the peak industry body for Body Corporate and Community Title Management in Queensland. For more information please click here...