Can An Owner Take Out Their Own Strata Insurance?
All strata corporations, regardless of size, must obtain property and liability insurance as specified by the Strata Property Act. This includes strata-titled duplexes and bare land strata developments (“strata subdivisions”). There has been always a debate about what the issues are & what can be the solution for an owner in taking out their own strata insurance. Below is one of the issue along with a solution that usually an owner faces while opting for any strata insurance.
The issue As An Owner Taking Out Your Own Strata Building Insurance
An owner wants to take out a further policy in her name to cover the building and common property and quotes Consumer Affairs Victoria website which advises that owners CAN take out an additional policy in addition to the Owners Corporation policy.
The concern is that this advice may create potential insurance problems.
The Solution For An Owner Taking Out Your Own Strata Insurance
The CAV is correct of course, as both the Owners Corporation and individual owners can have additional insurance.
The Owners Corporation has a mechanism for this under Section 62 and the Owners are welcome to do what they please with their own property/lot.
However, “can they do this” is just one question.
The other two that any Owners Corporation or Owner should consider is:
- Should I do this?
- Will I be able to do this?
The requirements of the Owners Corporation Act do not change because of this, the Owners Corporation must still insure all structures for full reinstatement and replacement in the name of the Owners Corporation in accordance with the Act.
So, any insurance an owner would purchase on their own property would be above and beyond the normal Strata Insurance organised on behalf of the Owners Corporation.
Essentially the owner could be double insuring their property. And unless there is something unusual or a specific gap the owner is looking to close there isn’t any benefit from double insuring.
The owner will only be entitled to claim up to the building sum insured on any policy and wouldn’t receive a larger payout or claims payment for insuring above and beyond the Owners Corporation’s insurance.
Regarding their interest in the common property, this is handled via their membership in the Owners Corporation, from CHU’s perspective we would never place a policy on an Owners Corporation in the name of a single owner.
There have also been changes in the insurance landscape, specifically around ensuring that the policies insurers and underwriters sell are appropriate for the risks they cover.
Because of this there may be difficulties in the owner finding a policy that will cover a Strata property insurance, or even part of it, in their name solely.
What is most likely is finding a domestic home policy and placing that on the unit – which is typically what happens in these scenarios.
However again, this isn’t a replacement for the insurance that the Owners Corporation takes out, nor does it lessen the amount for which the Owners Corporation needs to insure the buildings.
So, the only effect would be for the owner to pay more for insurance for policy that is insuring something that’s already insured.
The reason either of these exceptions exist is for extraordinary circumstances, for example if there is something at the site or within the lot that’s not covered by the Strata Insurance and needs another policy to cover.
This provides the option for both the Owners and Owners Corporation having the ability to insure above and beyond the Owners Corporation’s policy they can purchase a policy to cover this item/risk.
In summary, any owner is welcome to purchase their own insurance if they choose, however the requirement for the Owners Corporation to insure for reinstatement and replacement is still there so the owner will need to consider if this extra cover is of any value to them.
