Owners corporation insurance: what is and isn’t covered?
One of the many functions of an owners corporation is taking out and paying premiums on insurance for common property. In Victoria, owners corporations are required to insure all buildings on the common property.
A building is defined as:
- A structure and part of a building or structure
- Walls, out-buildings, service installations and other things attached to the main structure
- Any pipes or cables used to provide services to a party other than the owners corporation or its members (shared services)
- A boat or a pontoon permanently moored or fixed to land.
Insurance for mixed-use developments
Developments with lots used for different purposes, such as shops and homes, are called “mixed-use”. The cost of insurance may be higher for some lots than others in a mixed-use development. Specific lots within an owners corporation may be required to pay an extra premium for increased risk.
What is the minimum owners corporation insurance that must be paid?
The minimum insurance requirements for an owners corporation are:
Reinstatement and replacement insurance
This covers the cost of a rebuild should any event such as a fire occur.
The insurance premium for replacement insurance is generally one of the biggest annual costs for an owners corporation as it covers the rebuild of common property buildings.
The insurance must cover for the replacement, repair and rebuilding of the damaged property, including improvements and fixtures, the cost of demolition and removal of debris, employment of architects/surveyors and replacement of services such as driveways and fences.
When renewing insurance, an owners corporation must ensure that the sum insured is more than the value of the buildings. A valuation may be required to determine the current value.
For plans that have more than 100 lots or raise more than $200,000 in fees annually (known as prescribed owners corporations), a valuation must be carried out every five years.
Public liability insurance
This is for common property which protects the owners corporation from incidents that occur on common property such as slips or falls.
Public liability insurance is there to protect the owners corporation and pay compensation out if someone is injured, their property is damaged, or a death occurs on common property.
Owners corporations with common property must have public liability insurance of no less than $10 million for the common property.