05 Apr Insurance
Insurance is a significant matter for all members of an owner corporation or Body Corporate.
Recognising the shared interest, insurance held by an owners corporation gives peace of mind and assists in maintaining integrity of building by having provide prompt rectification of damaged property.
Generally, an owners corporation is required to insure all buildings, both common property and lots, for reinstatement when damage occurs. This includes fixtures such as kitchen cabinets within a lot.
Reinstatement insurance is required for the full value of all buildings. If underinsured, it could result in the insurer not being required to pay the full cost of a claim. This would require that the members fund any shortfall.
A prescribed owners corporation is required of a valuation at least every five years. All owners corporations should have a valuation at least every five years and three years is recommended.
An owners corporation is required to have at least $10 million cover for public liability. This provides cover if an owners corporation is obliged to pay compensation for damage or injury to a person for an incident on common property.
Owners Corporation insurance does not extend to owner’s chattels and goods such as furniture, appliances, carpets and floating timber floors. Owners should have contents insurance and if a lot is tenanted, have landlord’s contents insurance. This covers matters such as carpets and drapes which are not part of the building. It should also provide for public liability within the lot.
Tenants should be advised to take out contents insurance. With commercial properties, a tenant may be responsible for effecting in accordance with the lease. This is a matter between the landlord and tenant. Commercial landlords may require specialist advice in this area.
Insurance held by an owners corporation does not provide compensation for ordinary wear and tear which occurs over time. Also, if the insurer determines that a loss arises because of a failure of maintenance, it may decline a claim.
An owners corporation is required to disclose any matter which would increase the risk covered by insurer. The increased risk may be significant renovations which increase the reinstatement cost of the building or a change to the use of the lot which may affect the premium.