Understanding Strata Insurance: A Comprehensive Guide for Owners and Residents

Jul 30, 2023

Welcome to Trident Insurance’s comprehensive guide to understanding strata insurance in Western Australia. Strata living comes with its own unique set of complexities, and navigating the insurance landscape can be especially challenging. Whether you’re an owner, resident, or part of a strata council, this guide will break down everything you need to know about protecting your property and community. From legal requirements to the nuances of coverage and claim processes, let’s delve into the world of strata insurance.

What is strata insurance?

Strata insurance, also known as body corporate insurance or owners corporation insurance, is a specialised form of insurance designed to cover shared or common property as defined by a property’s strata title or scheme. This isn’t limited to just the physical structure like walls and roofs; it often extends to shared amenities and even certain liabilities. Strata insurance is essential for properties divided into individual ‘lots’ owned by different people but governed by a collective body such as a strata council or committee.

What is covered by strata insurance?

Different insurance providers will offer varying coverage options.  Here is a summary of the general coverage solutions offered by Insurers that Trident have access to.

Property coverage

This section of the policy provides coverage for damage to the building and any common property areas. Importantly, it also includes compensation for loss of rent incurred due to damage. For example, if a fire affects the Unit or common areas, making the property unfit to occupy, this part of the policy would kick in to cover the loss of rent suffered.

Voluntary workers’ personal accident coverage

If an individual is working voluntarily on the property and suffers an injury, this provision will cover their lost wages on a weekly basis. Additionally, a sum will be paid out in the event of permanent impairment or death..

Office bearers’ liability

Strata councils or committees are a crucial part of strata living, making decisions that impact everyone in the building or complex. This section protects the legal liability of the committee following a wrongful act committed by one of its members. For instance, if a committee member is found to have acted negligently or dishonestly in a way that harms the community, this part of the insurance will cover legal ramifications.

Fidelity guarantee

Unfortunately, financial misconduct can happen, even within a strata council. Should someone on the committee misappropriate or steal funds from the strata, this coverage will compensate for the amount lost, as per the terms laid out in the policy.

Equipment breakdown

With modern buildings featuring an array of mechanical and electrical amenities, this part is increasingly relevant. It provides protection against the breakdown of electrical and mechanical items like elevators, air conditioners, and other critical machinery.

Public liability

One of the most important facets, this section provides coverage in case a member of the public is injured or if property damage occurs due to the negligence of the strata. This could range from a slip-and-fall accident in a communal area to damages sustained from malfunctioning equipment on the property.

Legal expenses cover

Legal battles can be long and costly affairs. This section covers the legal defence cost for matters brought against the body corporate. These matters could range from a regulatory audit to violations related to workplace health and safety.

Legal requirements in Western Australia

Strata insurance in Western Australia isn’t just a suggestion—it’s a legal necessity. Governed by the Strata Titles Act of Western Australia, strata schemes are mandated to maintain adequate insurance coverageto protect both the common property and individual lot owners.

Mandatory provisions

The Strata Titles Act outlines a set of minimum requirements that every strata insurance policy must meet. These include:

Building and common property: Insurance must cover the replacement or repair of common property and buildings to their condition before any damage occurred.

  • Public liability: A minimum level of public liability coverage is required to protect against claims for injury or death occurring in the common areas, or damage to property.

Valuation: To avoid the pitfall of underinsurance the strata is required to obtain a professional valuation every 5 years to determine the replacement cost of insured buildings.

Penalties for non-compliance

Failure to comply with these legal requirements can result in severe repercussions for the strata council or body corporate, including substantial fines and legal ramifications. In some cases, individual members of the strata council could be held personally liable for any shortfalls or lapses in coverage.

Who is responsible for strata insurance?

Strata insurance is a collective responsibility, involving both the Strata council and individual lot owners, each with distinct roles to play.

Strata council

The strata council holds the primary responsibility for managing strata insurance, often with the support of a strata management company and an Insurance Broker, such as Trident.  The council would liaise with Trident for the annual renewal of the policy, ensuring that cover remains up-to-date especially if there are changes to the building like renovations or new amenities.

If an incident occurs that requires an insurance claim, the council initiates and oversees the claims process. The council also plays a vital role in communicating policy details, including changes, renewals, or claims statuses, to all lot owners and residents.

Lot owners

Lot owners, while not directly involved in the procurement of the strata insurance policy, have their own set of obligations. Primarily, it’s essential for lot owners to understand what is covered and what isn’t, particularly because strata insurance often does not cover the interiors of individual units or personal belongings. In light of this, lot owners typically need to secure additional coverage, such as contents insurance, for their own properties.  The policy will also not cover Tenants Rent Default, only loss of rent resulting from Damage to Property.

Lot owners should also notify the strata council about any modifications they make to their units, as these may affect the overall strata insurance policy.

What is not covered?

Strata insurance mainly covers common areas and building exteriors, not individual unit interiors or personal belongings. This means that personal items, specialised upgrades like marble bench tops, and interior fixtures such as curtains and carpets are usually not included in the coverage.  Some policies will exclude Floating Floors. Tenants Rent Default is also not insured.  For a detailed understanding of specific exclusions, our team at Trident Insurance is available for consultation.

 Claims arising directly or indirectly from lack of maintenance or Wear and Tear are also excluded – so it is important that the Strata proactively address any maintenance issues.

 The cost of strata insurance

Determining the cost of strata insurance isn’t a one-size-fits-all calculation; it’s influenced by a variety of factors that can lead to significant differences in premiums. Here are some key variables:

  • Location: One of the primary factors affecting the cost is the geographical location of the strata property. Buildings situated in regions susceptible to natural disasters such as floods, bushfires, or cyclones often face higher premiums due to the elevated risk levels.
  • Amenities: The scope and number of amenities in a strata community can also affect the insurance cost. Features like swimming pools, gyms, or extensive garden areas require additional coverage, thereby increasing the overall premium.
  • Building age: The age and condition of the building are other critical factors. Older structures may be seen as higher risks due to ageing materials, outdated electrical systems, or less robust construction methods, all of which can lead to higher insurance costs.

Making a claim

Filing an insurance claim in a strata setting involves specific steps to ensure smooth processing.

  • Immediate action: First, take immediate steps to prevent further damage, if it’s safe. For example, shutting off water in the case of a leak can minimise additional issues and is often required by insurance policies.
  • Notify the strata council: As soon as possible, inform the strata council in writing, usually via email or a formal letter. Quick notification initiates the claims process and allows the council to take appropriate action.
  • Documentation: Gather evidence to support your claim. Take photographs of the damage and collect any relevant invoices or quotes for repair work, as this information will be crucial in processing the claim.
  • Claim submission: Typically, the strata council or strata manager submits the insurance claim. They’ll compile the necessary documentation and liaise with the broker or insurer, but it’s wise for individual lot owners to follow up to ensure timely processing.

Final thoughts

Strata insurance isn’t just a legal requirement; it’s essential for protecting your investment. . Understanding your policy is key to making informed decisions. If you’re in Western Australia and have questions or are ready to secure a policy, Trident Insurance can offer expert guidance, custom solutions, and clarification on policy exclusions. Reach out to us today to ensure your property is well-protected.






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