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When looking into property insurance, it usually doesn’t take too long before we come across a horror story about someone being under-insured, and discovering all too late that they’re seriously out of pocket.
What we encounter less of, is someone being over-insured, but according to Australian property insurance specialists, Flex Insurance, it’s potentially more common than we think. And it all comes down to knowing what’s already covered by your strata insurance and what you need to cover under your own contents or landlords’ insurance.
In simple terms, strata insurance covers all the common areas of an apartment complex, as well as the basic fabric of the building – but it stops at the door to your unit. That’s where your own insurance comes in.
So, let’s look at each in more detail.
If you consider all the things in an apartment building that the strata corporation, body corporate or owners’ corporation has responsibility for, then these should be the things that come under your strata title insurance. It means that a good strata insurance policy should cover damage, replacement or repairs to:
- External doors and windows at
entrances and lobbies
- External walls
- Internal corridors and hallways
- Lifts, escalators, stairwells and fire exits
- Exterior lighting and security systems
- The building fabric including first-fix plumbing and electrics, walls, foundations, skylights and roofs
- Shared facilities such as gyms, pools, concierge desks and laundries
- Fences, gates, shared driveways and car parking
- Gardens and communal entertaining areas
- Letterboxes and storage cages (but not their contents)
It’s not only tangible assets that are covered either. A well-structured strata insurance policy should also take into account liability for personal injury and/or property damage that occurs in areas managed by the body corporate, such as entrances to the building and in car parks.
All of the above could very easily be included in contents or landlord insurance policies – and if they are included, then you’re likely to be paying for them as part of your own premium, when you actually don’t need to.
Residential contents-only insurance
As mentioned, your building’s strata insurance generally stops at the front door and doesn’t cover repairs, maintenance costs or replacement of items within your apartment – although there are exceptions, which we’ll look at later.
The first thing to remember about living in a strata complex is that you generally only need contents insurance or landlord insurance. We often think about private property insurance being ‘home and contents’ cover, but since the apartment building itself and the grounds around should be covered under the strata’s building insurance, there’s no need for the ‘home’ component; just the contents.
Ask your strata corporation for a copy of its current insurance policy and, once you’re satisfied that it covers everything outside your apartment, look around for good contents-only insurance. You don’t need to be paying for something that’s already covered – especially since you’re already paying for through your strata fees.
So, what does a good contents or landlord policy look like? At minimum, it should cover you for loss, damage or repairs to the items within your apartment, such as:
- Furniture, furnishings, bed linen etc
- Household appliances and electrical equipment
- Kitchenware, crockery and cutlery
- Personal items, clothing, shoes etc
- Recreational, sport, musical and other equipment and instruments
- Entertainment and computer equipment
- Artwork, curtains, lighting, floor coverings
- Outdoor or balcony settings
- Bikes and adventure equipment while stored at home
It should also cover you for legal liabilities in the event of a claim for damages incurred within the walls or on the balcony or courtyard of your apartment.
Put simply, your body corporate’s strata insurance should cover things that happen outside your apartment, while your own insurance should cover events within it.
The exception is damage to items within your apartment caused by faulty plumbing or electricals that are part of the building’s construction (for example a leaking pipe in your ceiling which damages your carpet). This is often included in strata insurance, but the lines can be blurred, so in this instance, it’s not a bad (or a particularly expensive) thing to have this included in your own insurance, just in case.
If you’re renting out your apartment, then landlords’ insurance is designed for you. It generally places less emphasis on possessions (though these are still covered where they’re provided by you as the landlord – for example light fittings, dishwasher etc), and put more focus on areas that a landlord is likely to need covered, such as the cost of accidental or malicious damage, personal injury or loss of rent.
Beware of scams
Like most industries, where terms and conditions can be confusing and wordy, scams and cons appear from time to time, and it’s surprising how easily new homeowners can be targeted directly with offers for cheap insurance. Never sign up to an insurance policy offered to you out-of-the-blue without doing your research.
Similarly, when disaster does strike, unscrupulous tradespeople and fake insurance assessors can, and do, prey on the vulnerability and inexperience of homeowners looking to rebuild their lives. Thankfully, the Insurance Council of Australia keeps an eye out for scams that are going around, and reports these to the media and on its own website.
Shop around and compare policies
Rarely (and unfortunately) are any two policies alike, and this can make it difficult to find the ideal policy for you. However, a good start would be the Insurance Council of Australia again, which has a link to help find insurers based on category.
If you want to go straight to the source, the Underwriting Agencies Council also provides a list of all its members.
Buying and maintaining an apartment can be expensive enough without paying for insurance you don’t need. Before signing up to an insurance policy, always read (and make sure you understand) what’s in your strata building insurance, so you’re not paying twice for cover – once in your own premium and once through your strata fees.
Finally, make sure your insurer knows property, and in particular, the property insurance rules for your state – they vary across borders, and what may be required under strata insurance in Sydney, might be optional in Melbourne.