Insuring your strata unit can be a little bewildering. In this blog post we explain what Residential Strata Insurance is so you will understand how it works and what other insurances you will need to arrange.
Strata and Insurance
Your lot is part of an entity – a strata company. If you own a lot within a strata titled property, then you are automatically a member of that company. Your ownership in some ways is similar to being a shareholder, with certain rights and responsibilities relating to this ownership.
Your management team is a group of fellow owners elected at each Annual General Meeting of the Strata Company. This council is appointed to carry out functions, duties and powers of the Strata Company (as defined by the Act) and is liable for such things as effecting proper insurance cover.
The strata company has unlimited liability, which means individual owners have an unlimited potential financial obligation. This means you could personally lose all your assets if something is deemed to be the fault of, or go wrong with, the conduct or operation of the strata company, and the company is not properly insured!
There are a few forms of insurance that apply when you are an owner of a strata titled property, and you should educate yourself about the level of cover each of your policies provides to protect yourself from financial loss.
This particular article covers Residential Strata Insurance, which is the type of insurance taken out by the strata company. This is a general snapshot of how it works – but remember there are plenty of variations from state to state and property to property.
Residential Strata Insurance
What is it? The strata company’s major asset is the building/property itself. It’s essential that the building is correctly insured for its full replacement cost. Residential strata insurance essentially covers common property under the management of a strata title or strata company entity. Holding strata insurance is mandatory under each state’s strata legislation. What does it cover? Strata insurance generally covers common or shared property as defined on the Strata Plan. This might include the structure or building itself, common areas, lifts, pools, car parks, gardens, wiring, balconies, walls, windows, ceilings and floors – but the inclusions vary from property to property. Strata insurance must also provide liability cover in the event people are injured on common property. What doesn’t it cover? Strata insurance generally has restrictions to the policy expressed as exclusions. Each insurer has different exclusions and policy terms and conditions. Exclusions can be for certain risks, such as landslip or flood, or for certain property features, such as fencing. Be very vigilant about what is included in your policy and remember that strata insurance policies do not cover your contents and personal items (chattels). Who pays it? The cost of insurance is shared by all lot owners in accordance with their unit entitlement allocation or as otherwise directed by management statement or by-law. This article is general advice only. If you have questions about strata insurance, contact the Strata Community of Australia in your relevant state or territory. Abode Strata Management is an accredited, WA-based boutique strata management company providing residential and commercial strata management. Abode specialises in efficient, tailored solutions and sensitive management of people, for small residential right up to large mixed-use developments. Follow Abode on Linked In.