Do I Need Building Insurance for a Strata Unit?

When you own a strata unit, understanding the different types of insurance involved can be a little daunting. Many people wonder what is covered under their strata scheme’s insurance policy, and what type of insurance they should take out for themselves. We’ll explore strata ownership in more detail, particularly regarding insurance obligations and responsibilities.

What does strata unit ownership mean?

Owning a strata unit means you have ownership of and responsibility for your lot while sharing responsibility for common property with other unit owners. Common property includes areas like stairwells, gardens, hallways or amenities such as gyms and pools. This shared responsibility is different from owning a freestanding property, where all aspects of maintenance and insurance are your own responsibility.

In a strata property, you’re part of a community. Everybody pays strata levies that contribute to the general upkeep of the property, as well as insurance. However, you’re still responsible when it comes to looking after everything within your four walls, which is why it’s crucial to understand your insurance obligations.

Does an Owners Corporation need insurance?

In South Australia, the strata corporation (sometimes called Owner’s Corporation) is legally required to hold building insurance for the entire property. This ensures compliance with legislation and protects all unit owners against major property risks.

The premiums for this insurance are paid for by strata levies, meaning everybody contributes evenly in line with their ownership. This insurance keeps the building financially protected from damage or unforeseen events.

What does building insurance cover in a strata scheme?

Building insurance in a strata scheme usually covers the structural parts of the property. This includes roofing, external walls, flooring within common areas and other fixed features such as stairwells, lifts or shared foyers. Essentially, it ensures that the physical building and common property are protected against risks like fire, storm damage or vandalism.

However, it’s important to understand that building insurance generally does not cover the contents within individual units, such as furniture, appliances or personal belongings. This is where you’ll need some insurance of your own, whether you live under strata or community title.

Do I need building insurance for a strata unit?

As a strata unit owner, you’re responsible for insuring the contents of your unit and managing your personal liability. So, while you don’t need ‘building insurance’, as your strata levies cover this, you certainly do need personal contents insurance. Contents insurance protects your belongings like furniture, electronics and clothing from risks like theft or internal water damage. Some people choose to have public liability insurance in case someone is injured on their property, however, this is really a matter of personal preference, particularly if you rarely expect to have visitors.

Reviewing your building insurance policies

Just as it’s important for you to review your contents insurance if you add significant assets to your home, strata corporations must also review policies regularly. This ensures the scheme is covered appropriately, especially if you do some major renovations or repairs, or there’s an external shift that affects the property’s market value.

A well-managed strata scheme should be reviewing its insurance policies regularly. It’s not just about ensuring the building is appropriately covered, but also that you’re getting the best value for money.

The risks of underinsurance or no insurance

Underinsurance or lack of insurance in a strata scheme can lead to significant risks for both individual owners and the scheme as a whole. Imagine something occurs requiring major building repairs. If the repairs aren’t covered by insurance, the burden of paying for them falls on every owner. Typically, this would occur through the implementation of special levies or even drawing on the sinking fund.

Naturally, there are also legal risks relating to lack of insurance, but it can also turn away potential buyers. Nobody wants to buy into a scheme that doesn’t even manage its insurance responsibilities properly.

How professional strata management can help

Experienced strata managers, like the team at Strata Management SA, can ensure your strata corporation has the right type of insurance coverage for your specific needs. From sourcing multiple quotes to managing your claims, professional strata management makes it easy. Basically, a strata manager takes care of all matters relating to insurance and compliance, leaving your committee to handle the day-to-day aspects of the community.

Need more information about strata building insurance?

If you’re uncertain about your strata unit’s insurance or need some expert advice, Strata Management SA is here to help. Our team specialises in South Australian strata management and can help you choose the right coverage, review policies or address any other insurance concerns. Contact us today to find out how we can help.