Protecting Your Investment: Why Smart Strata Insurance and Valuations Are Non-Negotiable

As someone deeply involved in the world of property, particularly strata schemes, I've seen first hand the complexities and potential pitfalls that come with managing shared living spaces. One of the most critical, yet often misunderstood, aspects of strata management is insurance. It's not just about ticking a box; it's about safeguarding a significant investment for every owner in the scheme. Today, I want to talk about two pillars of robust strata protection: having the correct insurance cover and ensuring your building's valuation is always current.

Beyond the Basics: Understanding Your Strata Insurance Cover

When we talk about "strata insurance," many people immediately think of just the building itself. While building insurance is undeniably central, the reality of comprehensive strata cover is far more nuanced. From my perspective, it's about understanding the unique risks your specific scheme faces and tailoring your policy to address them.

Firstly, a basic building policy covers common property and shared structures – think roofs, common walls, foundations, and often fixed fixtures within individual lots (depending on your strata plan and state legislation). But what about everything else?

I always advise strata committees and owners to look beyond this core. For instance, public liability insurance is absolutely vital. Imagine a visitor tripping on a loose paving stone in a common area. This policy protects the Owners Corporation from claims of injury or property damage for which they might be held responsible. Without adequate cover, the costs could be astronomical and fall back on individual owners.

Then there's fidelity guarantee insurance, which protects the scheme against theft by a committee member or strata manager. Given that large sums of money are managed by these individuals, I see this as a crucial layer of protection. Additionally, office bearers' liability protects committee members from claims arising from their decisions and actions (or inactions) while serving the Owners Corporation. Volunteer positions carry responsibilities, and this cover provides peace of mind.

Finally, consider common area contents like gym equipment, furniture in a lobby, or landscaping features. These are often separate from the building's structure but represent a significant asset that needs protection.

My key takeaway here is this: a one-size-fits-all approach to strata insurance simply doesn't work. I strongly recommend working with an experienced strata insurance broker who can delve into your specific strata plan, by-laws, and the unique characteristics of your building to ensure every potential vulnerability is covered.

The Foundation of Protection: A Current Building Insurance Valuation

Having the right types of cover is one half of the equation; the other, equally critical half, is ensuring your sum insured is accurate and reflects the current cost of rebuilding. This is where a professional, up-to-date building insurance valuation becomes indispensable.

I've witnessed the devastating consequences of underinsurance more times than I care to remember. In a scenario where your building is significantly damaged or destroyed, the sum insured is the maximum amount your insurer will pay out. If this figure is too low, the Owners Corporation is left to bridge the gap, often through hefty special levies imposed on all owners. In some cases, insurers may even apply a 'co-insurance' clause, meaning if you're underinsured, they only pay a proportion of the loss, magnifying the financial shortfall.

Several factors make regular valuations absolutely essential:

• Inflation and Rising Construction Costs: The cost of materials and labour doesn't stand still. What it cost to build or rebuild five years ago is vastly different from today.
• Building Code Changes: New regulations and compliance requirements can significantly increase the cost of reconstruction.
• Demolition and Debris Removal: A valuation isn't just about the new build; it must also account for the substantial costs of demolishing the damaged structure and removing the debris.
• Professional Fees: Architects, engineers, project managers – their fees add up and need to be included in the sum insured.
• Council Charges: Various council fees and approvals can also contribute to the overall rebuilding cost.

My strong advice is that Owners Corporations should commission a professional building insurance valuation at least every three to five years. This isn't an expense; it's an investment in financial security. A qualified valuer will assess all these elements, providing a comprehensive and accurate sum insured that truly reflects the total replacement cost of your building and common areas.

Final Thoughts

Ultimately, the goal of strata insurance is to provide peace of mind and financial security for all owners within a scheme. From my perspective, achieving this means being proactive. Don't just renew your policy year after year without scrutiny. Take the time to review your cover, understand its nuances, and ensure your building's valuation is always current. It's the best way I know to protect everyone's most significant asset.