Do I need building insurance in a strata unit?

Are you paying for insurance you don't need?

If you own an apartment or unit in a strata property, then you don't need to take out separate building insurance for your individual lot, as this will be organised by your body corporate / strata corporation. Instead, smart unit owners take out contents or landlord insurance. That's because items within the unit are generally not covered by the body corporate's strata building insurance.

In every state and territory, almost all^* body corporates and owner or strata corporations are required, by law, to hold suitable building insurance for their property, such as the specialist cover offered by Flex.

This means that individual unit owners shouldn't need to take out their own building insurance, as the building will already be covered for the cost of repairing damage, as well as public liability claims.

What does the strata building insurance cover?

Different states have different laws - especially when it comes to liability cover - but all of them require the body corporate to take out insurance to cover the cost of damage and repairs to buildings and common areas, as well as public liability insurance for any personal injury and/or personal property damage suffered while on common property (e.g. carparks, driveways, common entryways, stairwells and lobbies).

What does the strata building insurance not cover?

A popular rule of thumb is that 'strata insurance stops at the apartment door'. This means that everything within your unit (other than some permanent fixtures such as stoves, toilets, bathtubs etc) must be covered separately, by the unit owner. If you live there, then 'contents-only' insurance is likely to be what you need, whereas good landlord insurance should cover you if you're renting it out.

There is an exception to this 'rule', however, when a defect in the building fabric (e.g. a leaking pipe in a ceiling cavity) causes damage in a unit. In such cases, individual owners may be able to claim repair costs through the strata building insurance. This can be a grey area though, so it's handy to check with your strata committee every time the insurance policy is renewed.

Is the building insurance adequate?

CPI, labour costs and rises in cost of materials has spiked in recent years and as a result, underinsurance has become a major issue for strata property owners. Requirements within the state and territory legislation are only starting points, and if damage, disaster, injury or even fraud or theft occur, unit owners may still be left with a hefty bill to cover any shortfall.

That's why it's important for you, as an owner, to check the cover taken out by your body corporate committees, and raise concerns if you think it leaves expensive gaps or that the sum insured needs to be adjusted.

For example, standard cover doesn't usually include machinery breakdown such as for lifts or pumps - but these can be expensive to fix. Legal costs to defend a claim or appeal an order are also not covered, nor is worker or volunteer injury cover unless it is stipulated by state law.

Flex strata insurance is tailored to each state, so that specific requirements are met, for example in NSW, voluntary worker cover is automatically included in policy in that state as it's a legal obligation under NSW law.

So, in short, body corporates must take out insurance for the building and common property, whereas individual unit owners are wise to purchase contents-only or landlord insurance - that way, both inside and outside of your apartment are covered.

*In some states, very small (usually two or three unit) strata properties are exempt from mandatory insurance, though it can still be very valuable to have it.