Navigating the insurance maze in a body corporate can be complex, so when you are purchasing contents and other insurance, we recommend you investigating the body corporate insurance policy to find out what is covered. It could save you money in paying for coverage that isn’t required, as body corporate insurance may cover some fixed parts of your property and it could save you the distress of finding out down the track that you are not covered for a particular item and have the financial burden of paying for a repair or a replacement.
In this article we take a quick overview of the types of insurance that might apply to you.
Why are insurance premiums increasing year on year?
Collective Insurance Brokers (CIB) explained why premiums increase year on year. “Insurers need to collect enough premiums to cover the cost of rising claims, expenses, reinsurance costs, distribution costs, and a profit margin. The recent spate of catastrophes and the global pandemic have hit insurers hard. These disasters also impact the cost of reinsurance, the cover that insurers purchase to protect them from major claim events, such as a natural disaster. Both can lead to increasing premiums and reduced appetite for risk.
Another factor to consider is that insurance typically cycles through peaks and troughs, and premiums have been increasing over the last 3 years as underwriters move to recover their large losses. The diagram below shows how the insurance cycle works and puts the strata and community title insurance sector firmly within a hard market.”
Every owner contributes to this insurance through their levies. Depending on the type of property you own, this may cover the full replacement value of the building, assets, and public liability over the common property, such as the pool and lifts.
If you own in a building format plan, the policy will cover the replacement and damage to the building. Owners in standard format plans will need to obtain their own insurance to cover the building structure. The key to remember is every scheme is different and can have different requirements to even similar looking properties.
But that’s just half of the story.
Every resident should have a form of contents insurance to cover inside their property, and this may need to cover contents, carpets, curtains, and certain fixtures such as split system air conditioners and liability cover for third party injury within their unit. Again, a review of your strata policy will assist you in determining your best option.
There are also two other policies you may need to consider.
If you’re renting out your property, consider landlord insurance, which should cover items that are part of the property’s features that aren’t covered by strata insurance – these may be items such as an oven, light fittings, carpets and curtains.
Some insurance policies will also protect your property from accidental and deliberate damage or theft of your property by tenants as well as loss of income should a renter default on their payment.
If your property is part of a letting pool, talk to your insurance broker about short stay landlord insurance and whether this policy provides the right type of coverage for you.
Whether it is fire, theft or storm related, protecting personal possessions is the primary aim of renter’s or tenant insurance.
There are low-cost contents insurance policies on the market to cover tenants for the basics, and it is worth reviewing your policy before its renewal each year to ensure that the level of coverage is still appropriate.
Depending on your insurer, renter’s contents insurance can also cover accidental damage, coverage of property when you’re moving between premises and even cover goods in storage.
The Insurance Council of Australia has these great tips to make sure you’ve got all the bases (and property) covered.
Check the defined events in your Policy Disclosure Statement (PDS) to make sure they cover you for the risks you face.
Insurers may treat professionally managed properties differently to if you manage the property yourself.
Holiday properties may require a short-stay landlord policy.
You can reduce your premium by taking out a higher excess.
Check your policy to see if it covers contents inside the property that you allow your tenants to use.
Strata insurance policies will not cover you for the risks associated with leasing your unit or apartment.
An insurance broker can help find a policy that’s most appropriate to your needs.
Ultimately the best course of action is to be aware of what your body corporate insurance and personal insurance covers and seek appropriate independent insurance advice.