Insurance For Your Body Corporate
With the increase in size and complexity of bodies corporate and the financial affairs of multi-unit complexes only becoming more complicated, you’re probably thinking about covering your body corporate with the best insurance, … right? Well many people do, and in addition to our professional systems and procedures, to provide each body corporate with insurance advice Strata Title Administration will provide you with all the details you need.
Contact us to find out more about how Strata Title Administration can assist with your body corporate insurance.
Body Corporate Insurance Cover
What exactly does your body corporate insurance cover?
A body Corporate must insure all buildings and other improvements for total reinstatement, as stipulated by the Unit Titles Act 1972. In this context, buildings and other improvements refer to items like fences, letterboxes, carparks and lifts. The building is covered for “accidental damage” under the corporate’s principal insurance policy, which does not include repairs and maintenance. Furthermore, any alterations to the original building are also not covered.
The cost for insurance is determined on the basis of unit entitlement. This means the relative value of each unit in relation to other units. The actual cost of your proportion of the annual valuer’s fee and the insurance premium is usually less than it would be for an equivalent property that is not a body corporate.
A Body Corporate most often decides to insure against liabilities, the most common being Public Liability and Statutory Liability. The latter provides for fines and legal defense costs which arise from unintentional breaches of the Resource Management Act, the Building Act and the Health and Safety in Employment Act. Fines for a breach of the health and Safety Employment Act 1992 have been steadily increasing. For example Claymark Sawmills was fined $70,000 after an employee lost a leg in a workplace accident, which does not include legal costs. Since provisions of this Act require a body corporate to maintain safe and sanitary premises, most bodies corporate have a liability cover to minimise the risk.
There have been several important rule changes that have taken place under the ‘Unit Titles Act 1972’ for body corporate insurance. The changes are outlined below:
- the insurer must reinstate the damage, no matter what the cost
- no individual unit proprietor is allowed to insure their own unit – all principal and accessory units and all
common property must be insured by the body corporate
- once an insurer has taken on the risk of a principal insurance policy for a body corporate (as defined in
sections 15 and 38 of the Act) it cannot go off risk, even for non-payment of premium, unless it gives
every proprietor and every mortgagee 30 days’ written notice of its intention to cancel the insurance
cover
- because the insurer must reinstate any damage and cannot pay out cash compensation to interested
parties, mortgagees lost their right to a share of the proceeds of the insurance policy.
Insurance Claims
Residential:
As part of the body corporate insurance policies, insurance companies have an automatic loss of rentals up to $25,000 per unit with a tenant. You should check whether your policy covers loss of rentals if you own a residential unit.
Non Residential:
With non residential body corporates, it is sensible to have a loss of rentals cover, and a provision for up to $5000 for claim preparation fees so that if the property gets damaged the rental incomes are protected.
Mortgage redemption Insurance
After the Unit Titles Amendment Act 1979 the body corporate is required to insure “all buildings and other improvements on the land to the replacement value thereof” against a variety of contingencies such as earthquakes. The Act also makes it mandatory that if a body corporate obtains any money it must use it to reinstate or rebuild the damaged building. Therefore it is not necessary to have a mortgage redemption insurance policy because the mortgagee will have at all times the value of your property as security.
Insurance Claims
If damage occurs to your unit which you believe is a claim on your body corporate’s insurance policy then you should contact Strata (www.bodycorporate.co.nz) to discuss the issue. Strata can either direct you to an insurance broker or arrange for an insurance claim form to be sent to you. If there is minor damage, such as a broken window, notify Strata who can advise you if you can get a tradesman in of if it is handled directly by Strata’s office.
Disaster Insurance Cover
A Body Corporate must have sufficient insurance cover to reinstate all buildings and other improvements in the event of a fire, earthquake or other disaster. Expert valuation knowledge is needed to assess what it would cost to demolish a damaged building and to redesign and reinstate the body corporate; taking into account architect fees, consents and effect of inflation at the time of reconstruction. For this reason a registered value is instructed annually to prepare a reinstatement insurance valuation for your body corporate on the assumption that it suffers 100% loss by fire or earthquake.
The Earthquake Commission Act provides the state-owned Earthquake Commission (EQC) compulsory insurance of homes up to $100,000 plus GST against earthquakes and other disasters. Earthquake insurance of non residential property is not the function of Government, so the EQC does not provide any disaster insurance cover for non-residential properties.
For residential properties, the EQC has made it compulsory to insure for earthquake and other disasters. The EQC has a maximum liability of $100,000 plus GST per residential unit. For traditional houses, insurance cover above this limit is optional and can be provided by private insurers.
Domestic insurance
Most insurers cover up to $5,000 for landlord’s fittings, home appliances, curtains and fixed floor coverings in any residential unit with a tenant. However these are expected to be covered under the proprietor’s domestic contents’ policy if the unit is owner-occupied.
It is recommended that owners periodically take photos of chattels, fixtures and fittings, as these are of great assistance in the event of a claim for loss. You should check your domestic contents’ insurance policy to be certain you are adequately covered.