Often there is confusion surrounding what exactly is covered by a Body Corporate’s insurance policy. In this article, we will explain exactly what the Insurance policy of the Body Corporate covers.
Let’s start by explaining how a Sectional Title Insurance works.
Imagine that you can turn your unit upside down. Everything that falls out, such as movable items, is not covered by the Insurance Policy. The permanent fixtures that remain, such as the walls, are covered by the Body Corporate’s insurance policy. This is why sectional title homeowners need to take out separate insurance on their household goods.
What Does the Body Corporate Insurance Policy Cover?
Part of the fiduciary duty of the Body Corporate trustees is to ensure that the buildings and improvements to the common property are appropriately insured.
This duty not only requires selecting an appropriate insurance advisor but also necessitates trustees to declare the desired amount to be insured.
According to the Management Rule 29(1) (a) of the Sectional Title Act, ““At the first meeting of the trustees or soon thereafter as is possible, and annually thereafter, the trustees shall take steps to insure the buildings, and all improvements to the common property, to the full replacement value thereof, subject to negotiation of such excess, premiums and insurance rates as in the opinion of the trustees are most beneficial to the owners.”
This means that the Body Corporate insurance policy will cover permanent fixtures, fittings and buildings. The policy should also include indemnity and liability insurance against specific risks such as burst geysers and damage caused by natural events such as flooding or fire.
Accurately Determining the Insured Amount
Trustees are not always aware that the amount that can be insured is not only calculated by adding the market values of all units. It also factors in the costs of what it would take to restore the complex, or parts thereof, to its former state if damaged; professional fees, VAT and other associated costs. This also applies to all common property.
For this reason, we advise that an expert valuer or surveyor, specialised in sectional title valuations should be appointed to assess the exact sum.
Who Pays For Sectional Title Insurance?
The costs of the Body Corporate insurance policy is covered and shared among all the unit owners, which are then added to the monthly levies. However, this does not necessarily mean that the costs are shared equally. Contributions are generally based on the participation quota of a unit.
Payment of Excess
If excess needs to be paid, the owner of the unit claiming from insurance is liable for this payment.
In cases where the damage in one unit affects the other, for instance when someone forgets a tap on, and it floods the apartment below it; it would not be fair to ask that owner to pay the excess. For these types of situations, such owner may be liable to the Body Corporate by virtue of his or her negligence.
At the end of the day, all Sectional Title Owners, need to familiarise themselves with the terms and conditions of their Body Corporate policy. If you need any advice on Sectional Title Insurance or any other Body Corporate Management issue, contact our dedicated team today.