What does the law say;
A Body Corporate has a statutory duty to maintain insurance cover.
The Unit Titles Act, Section 135(1), requires a Body Corporate to “Insure and keep insured all buildings and other improvements on the land to their full insurable value”.
A Body Corporate has a statutory responsibility to be insured in a specific way;
- The provided policy must reinstate the damage up to the sum insured which is defined in the reinstatement insurance valuation upon which the insurance is based.
- All principal and accessory units and all common property must be insured by the Body Corporate unless all principal and accessory units in the Unit Plan are standalone units in which case the Body Corporate may by special resolution resolve that the individual owners may insure their principal and accessory units.
- The Body Corporate remains responsible for insuring the common property
The principal insurance policy as defined by Section 135(1) of the Unit Titles Act 2010 requires a Body Corporate to “Insure and keep insured all buildings and other improvements on the land to their full insurable value.”
Click here for the Unit Titles Act 2010
Types of Insurance Cover
Statutory liability Insurance cover
For fines or penalties imposed for unintentional breaches of certain statutes, inclusive of defense costs.
Broad form General/Public liability insurance cover
Cover against claims as a result of unexpected and unintentional property damage or personal injury for which the Body Corporate is legally liable for arising out of the activities of the insured (as previously agreed with the insurer) and legal defence costs
Office Bearers/Association Liability cover
Cover for the body corporate Chairperson and committee from allegations arising out of its decisions and actions.
Loss of Rent Cover
Covers residential owners, for an agreed period and normally an agreed or fixed maximum amount, for losses arising from a unit or the property being uninhabitable as the result of an accident or insurable event. In short, this will cover your rental expenses during a repair or reinstatement.
This will not apply to what insurers determine as commercial operations, such as serviced apartments, Airbnb, Book a Bach etc.
How long would I be covered for?
Indemnity Period
Alternative Accommodation Cover
Covers residential owners, for an agreed period and normally an agreed or fixed maximum amount, for losses arising from a unit or the property being uninhabitable as the result of an accident or insurable event. In short this will cover your accommodation expenses during the repair or reinstatement.
How long would I be covered for?
Indemnity Period
Business Interruption Insurance cover
Covers commercial owners, for an agreed period and normally an agreed or fixed maximum amount, for losses arising from a unit or the property being uninhabitable as the result of an accident or insurable event. In short this will cover your commercial rental expenses during a repair or reinstatement, due to an accident covered by insurance.
How long would I be covered for?
Indemnity Period
Landlords Fixtures & Fittings, Landlords Contents
This is generally an additional cover for commercial units or operations, but will generally cover certain items for residential tenancies. For residential tenancies, a general rule of thumb is that it covers all items that would normally be left in a vacant unit when it is sold.
Airbnb – Serviced apartments – holiday rentals – short-term rental accommodation.
Underwriters (insurers) classify these activities as businesses (commercial operation), not as residential tenancies, so you require, often additional commercial cover. This can be done under the Body Corporate insurance and would be an additional fee to the units concerned.
Meth Contamination
This is a constantly evolving form of cover, each underwriter (insurer) has a different level and limit of cover, and in addition to this requirement of the landlord specific requirements. These vary between underwriters and you will need to check the specific policy that the Body Corporate has, in general, you will need to have the tenancy tested clean at the start and between tenancies, and conduct regular inspections of the property.
Indemnity Period
The length of time for which cover is applicable under an insurance policy is called the indemnity period. The period of indemnity is, therefore, a critical component of insurance cover.
It is applicable to many parts of insurance cover, but in this context, we are discussing its application in regards to Loss of Rent, Alternative Accommodation and Business Interruption Insurance cover.
How long should the indemnity be?
A body corporate needs to carefully consider the indemnity period it is paying for. These are normally in 12 monthly lengths, such as 12, 24, 36 etc months.
A body corporate made up of townhouses may consider that the total complex can be rebuilt in 24 months, maybe even 12 months, and therefore pay for a 12 or 24-month indemnity. While a multi-level apartment block in a city would need a minimum of 36 months, to demolish and rebuild, even then that may be optimistic.
If the rebuilding of the complex takes longer then the indemnity period, you will be without the loss of rent/alternative accommodation/business interruption cover after the expiry period.
What are my responsibilities?
As an owner in a body corporate, you must pay your body corporate levies to ensure that the body corporate can meet its obligations to pay the insurance cover.
How is the Body Corporate insurance paid?
The insurance is paid in the levy invoices sent out each year to owners.
The insurance will be discussed at the AGM, and be included in the budget, also discussed at the same AGM. Following the AGM the body corporate will levy (invoice) out to each owner their portion of the budget and give a set period of time in which to pay.