Investing in a body corporate property can be a financially wise strategy, as in most cases it’s a more affordable way to get a foot on the property ladder. But body corporate properties come with certain fees and costs that you’ll need to be prepared to pay. One of these is body corporate insurance.
Why must bodies corporate take out insurance policies?
Body corporate insurance protects owners and their lots by providing general insurance cover for the property as a whole. The body corporate must insure the building for the full replacement value, which will cover damage and costs related to the reinstatement or replacement of the building. The body corporate may be held liable for any shortfall in insurance cover.
It makes good logical sense for properties to take out body corporate insurance as a whole. Uninsured lots would negatively impact upon lots that were insured, particularly if the building were damaged or destroyed. How would you replace the building if some owners had insurance and others didn’t? As well, banks need certainty that the building is secured. Clearly, all lot owners need to contribute to body corporate insurance.
Aside from any benefits gained, body corporate insurance is compulsory in Queensland, and all lot owners have no choice but to comply. All bodies corporate have a legal duty to insure their property and make sure their insurance policy meets the minimum legislative requirements.
What are the body corporate’s insurance responsibilities?
That depends on which plan format your building falls under. Under a building format plan, the boundary of your lot falls at the centre of the floor, wall and ceiling. This means that the body corporate will be responsible for maintaining the outside, foundations and roof of the entire building. Under a standard format plan, the boundary of your lot is defined using marks on the ground or a structural element of a building. This means the unit owner is responsible for maintaining the outside of the building within their lot boundary, as well as the foundations.
In a building format plan, the body corporate must take out the following insurances:
- Public liability for common property and body corporate assets, at a minimum of $10 million cover
- Full replacement value insurance for each building containing one or more lots
- Full replacement value for common property and body corporate assets, for example pool and pool equipment
In a standard format plan, the body corporate must take out the following insurances:
- Public liability for common property and body corporate assets, at a minimum of $10 million cover
- Full replacement value insurance only for those buildings within each lot that share a common wall with a building in another lot
- Full replacement value for common property and body corporate assets, for example pool and pool equipment
The body corporate is required to insure the property based on its most recent valuation. For this reason, the building should be valued at least once every five years, and the insurance policy should be reviewed each year, based on this valuation.
What is covered by body corporate insurance?
Body corporate insurance policies typically cover the following:
- Fences
- Elevators and escalators
- Swimming pools
- Pergolas
- Satellite dishes
- External awnings
- Closed-in balconies
- TV and other antennas
- Ducted air conditioning (that services more than one lot)
- Doors
- Windows
- External signs
- Outbuildings
- Underground services
- Built-in cupboards
- Baths
- Fixed tiling
- Toilets
- Walls
- Basins
- Ovens and cooktops
- Sinks
- Shower screens
- Insinkerators
What is not covered by body corporate insurance?
Body corporate insurance policies typically exclude the contents of individual units, including:
- Domestic appliances
- Carpets, blinds or curtains
- Removable fixtures
- Furniture such as couches, fridges etc.
- Temporary floors or floating floors
- Single unit air conditioners
- Dishwashers
- Ceiling coverings
- Carpet underlay
- Temporary walls
- Single unit hot water systems
- Loss of rent by tenant default
How is body corporate insurance organised?
Body corporate insurance is usually organised by the body corporate manager, if there is one, or the body corporate committee if there is no manager in place. The premiums are shared among each lot owner.
Who pays the insurance excess?
That will usually depend on the lots involved and the nature of the claim:
- Where a person has either accidentally or maliciously caused damage, that person is generally responsible for paying the excess.
- When an external event has occurred (for example, a hailstorm), the owner of the damaged property is usually responsible for paying the excess. This differs when more than one lot is damaged by the event, in which case the body corporate will often pay the excess.
- When a building or maintenance failure has caused damage, the person responsible for the maintenance of the cause is usually responsible for the excess.
Why does body corporate insurance vary so much?
Body corporate insurance can vary greatly between different properties. The cost of body corporate insurance can vary depending on factors such as:
- The location of the building (for example, a building in an area more prone to cyclones will be more expensive to insure than one located in a less risky region)
- The age and condition of the building
- The vulnerability of the property to an insured event
- The costs of common property
- The claims history of the complex
- Commercial activities carried out on the premises (for example, holiday letting)
- The level of excess payment chosen by the body corporate
- Government taxes on insurance
