Sectional title Insurance – What does it cover and who is responsible?

Do you live in a townhouse and do not know how the house is insured and what is insured?

Property management companies often have to turn away tenants believing that should their unit be broken into, the Body Corporate will claim their missing items from the Body Corporate Insurance. “What does the Insurance policy of the Body Corporate cover then?”, I am often asked.

Sectional Title Insurance Explained

Let’s explain it as many other Sectional Title experts have done before:

Imagine holding your unit in your hand and turning it upside down. Everything that falls out whilst hanging upside down will not covered by the Insurance Policy. All that remains in the unit whilst upside down for example, the sanitary ware, the fitted carpets, the walls, in other words, fixtures and fittings of a permanent nature, are in fact covered by the Body Corporate’s Insurance Policy.

It is therefore imperative that occupiers in sectional title units insure their household goods separately to ensure cover should their unit be broken into, or even worse, should fire destroy all their belongings, etc.

Whose duty is it to ensure that the body corporate is adequately insured?

It is the duty of the Trustees to ensure that the Body Corporate is adequately insured. Management Rule 29 states the following regarding what the trustees should insure the building against:

(1)(a)     … the trustees shall take steps to insure the buildings, and all improvements to the common property, to the full replacement value thereof, subject to negotiation of such excess, premiums and insurance rates as in the opinion of the trustees are most beneficial to the owners, against:

(i)            fire, lightning and explosion;

(ii)           riot, civil commotion, strikes, lock-outs, labour disturbances or malicious persons acting on behalf of or in connection with any political organization;

ii)            storm, tempest and flood;

(iv)         earthquake;

(v)          aircraft and other aerial devices or articles dropped there from;

(vi)         bursting or overflowing of water tanks, apparatus or pipes’

(vii)        impact with any of the said buildings or improvements by any road vehicle, horses or cattle;

(viii)       housebreaking or any attempt thereat;

(ix)         loss of occupation or loss of rent in respect of the above risks;

(x)          such other perils or dangers as the trustees or any holder of first mortgage bonds over not less than 25% in number of the units in the scheme, may deem appropriate.

Should the trustees fail to insure the building(s) against the abovementioned items, they would be in breach of their fiduciary duty and could eventually be sued personally for gross negligence. It is therefore imperative that a sectional title insurance expert’s advice be obtained when making decisions on your insurance policy.

Also view:

What are the differences between sectional title and full title ownership?

[Content with recognition to Ashleigh from Omni Estates]