How Does Body Corporate Insurance Work?

If you are the owner of a property within a body corporate, you are part of the increasing trend towards community living where you maintain the advantages of privacy and lifestyle without the maintenance and responsibilities of private property. Most properties situated within a body corporate have centralized caretaking, grounds maintenance, and bilateral resources, giving peace of mind on matters of body corporate insurance, security, and the management of the common property.

When handled by a professional body corporate manager, your strata community will offer maximum value and service to you.

What is body corporate insurance?

Body Corporates are forced to buy body corporate insurance to cover the building, common property, and common area contents of a strata scheme. Insurance is at hand for both residential and commercial body corporate properties.

Body corporate insurance – how does it all work?

Some of your insurance expenses will be covered by your Body Corporate cover when you purchase a unit-title property. Unlike private homeowners, bodies corporate are forced by law to carry full reinstatement insurance. This means the whole complex will be insured under one policy and you can’t insure your unit yourself.

What must the body corporate insure?

The type of survey plan registered for the building influences the Body Corporate’s duty to insure a building. The common types of plans registered as Community Titles Schemes are:

  • Building Format Plan (BFP): A building format plan is a form of subdivision that usually happens within a building. An example of a Scheme that is set up as a BFP is a multi-story block of residential units. A scheme registered under a Building Format Plan needs the Body Corporate to arrange suitable building cover and Public Liability (common property only) cover for the entire Scheme.
  • Standard Format Plan (SFP): A Standard Format of subdivision plan delineates land with references to marks on the ground or a structural element (for example, survey pegs in the ground). An example of a Scheme that is set up as an SFP includes a townhouse complex where on each lot is a building and a backyard or courtyard.

In most cases, Owners of a Lot in a Plan registered under a Standard Format Plan will need to arrange their own Building and Public Liability insurance for their own Lot. The Body Corporate is only needed to make sure Building and Public Liability insurance is established for the common areas.

If you are not certain what plan your scheme is registered under and if you are required to arrange your own building and public liability insurance for your Lot, please contact experts for further assistance.

What is covered by body corporate insurance?

  • Public liability of common areas
  • Common property and Body Corporate assets (e.g. pool and fence)
  • Buildings in which Lots (units) are situated

In summary, the Building part of the policy protects the building structure, including both external and internal everlasting fixtures (such as awnings, pergolas, built-in wardrobes, kitchen cabinets, bathroom vanities, solar panels, etc.). The damage must be brought about because of a defined act or event.

A ‘defined act’ is typically an unintentional or malevolent event, flood or water damage, or electrical fusion (i.e. motor burnout).

Please note: policies are not issued to cover harm stemming from gradual degeneration. Gradual degeneration and wear & tear are maintenance issues and should be dealt with as such.

What does body corporate insurance not cover? 

Whereas the building and all common property will be covered by the Body Corporate insurance, your Body Corporate insurance does not cover your personal assets – so yes, you (or your tenants) certainly also are required to have contents insurance.

How do I make a claim against my body corporate’s insurance policy?

If your unit has undergone damage as defined above and you want to claim it against the Body Corporate’s insurance, then you should complete an Insurance Claim Information Form. Follow the guidelines on the form and when finished submit it with a copy of your paid invoice or quotes to put right the damage. A claim will then be presented to the Body Corporate’s insurer for processing. It is reasonable not to take on rectification of resultant damage before lodging a claim as the insurer keeps the right to inspect the damage. If the repairs have been conducted without the insurer having the chance to see the damage, then the claim may be annulled.

If the incident/event requires instant action, you should contact the insurer and ask that they appoint an insurance evaluator to help with making safe and assisting with the claim.

What insurance do owners need to have for their units?

Homeowners are required to have their own contents cover for assets that are not protected by the Body Corporate’s policy. These include (but are not restricted to) floor coverings, light fittings, curtains, air conditioners, and public liability for inside their units.

If your Scheme is registered under a Standard Format Plan you may also be forced to have your own building cover for your unit.

Owners should consult their Insurance Broker to decide precisely what coverage they need.

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