The importance of insurance
The information contained in this newsletter is general information only and should not in any way be taken to be or relied on as accounting, financial or legal advice on insurance policies or insurance in general. If you are considering or require advice about an insurance policy, your insurance needs or insurance in general you should seek advice from an insurance representative, accountant, registered f inancial advisor or lawyer in relation to your personal circumstances.
What Insurance is a Strata Scheme Required to Have?
The minimum obligations on the insurance required to be obtained by a strata scheme is set out in Part 4 of the Strata Schemes Management Act 1996 (NSW).
In short, a strata scheme is required to have insurance in respect to the following:
In addition to the compulsory insurances set out above, a strata scheme may obtain insurance in respect to the following:
It is important to remember the Strata Schemes Management Act 1996 (NSW) only provides categories of insurance that a strata scheme must or may take it. It says nothing about the terms of the insurance policy or the exclusions an insurer may impose on the extent of its cover.
Consequently, it is important to strata schemes keep in mind a number of issues when making decisions about its insurance cover.
Most importantly you need to remember that an insurance policy is a contract, ie an agreement that if certain things happen they will pay on your claim. So this can also mean that certain things won’t be covered, ie a policy is not a catch all, and hence when you are comparing policies it is important to check a lot more than just the price!!!.
Some insurers cover a much wider range of incidents than others, and hence they can offer a lower premium.
For example, some insurers provide cover for certain machinery as part of the cover for damage to the building while others require you to pay extra.
It is important to remember that the Strata Schemes Management Act 1996 (NSW) requires a strata scheme to have insurance for the damage to the building belonging to the scheme (commonly referred to as common property or common areas).
There is no general requirement for the strata schemes to insure for damage to lot property or personal property belonging to a lot owner or tenant. Further, strata insurance policies generally do not cover damage to lot property or personal property (contents) unless the strata scheme is legally liable for causing that damage.
Considering the limitations of strata insurance policies, lot owners and tenants should always consider taking out their own insurance in relation to their lot property, contents or other property in respect to anything which happens in or arising from their lot.
As always strata schemes, lot owners and tenants should seek accounting, financial, insurance and/ or legal advice in respect to the appropriate insurances for their specific needs and circumstances, including the amount of cover.
An example of the value of insurance
A girl known to a PSS team member was visiting a friend at their house when some fat caught on fire. The fire was put out, but it was decided to take the pan/fat outside. As the girl opened the door for the person carrying the pan, the woman tripped and the contents flowed down the girls legs incurring serious burns. The payout received as compensation covered the operations and physio she needed as well an amount for pain and suffering she sustained. This all came from the home owner’s insurance policy. Whilst this relates to a house policy, such an incident may occur in a unit, and there are covers available to you which would protect you and provide for the injured party similarly to the one referred to here, however you will need to seek advice from an insurer advising what sort of incidents you are looking to cover.
This is not a one off, there are many stories regarding incidents of injury to tenants or visitors etc to a property. If not insured an accident could leave you, your tenants and/or guests in financial ruin, potentially to someone you care about!
Our up-dated blog
A blog has been posted on our website to assist you define the difference between something you may be able to claim under your scheme’s policy and that which would most likely be deemed maintenance. It is very easy to understand if you can answer one basic question in the affirmative or negative then check your insurance policy, remember it is a contract to cover certain events.