Written by William Paull
Co-Founder & Account Director
On this page
- The seven at a glance
- Does strata insurance cover committee members? Office bearers liability
- Does strata insurance cover fraud or theft of body corporate funds? Fidelity guarantee
- Does strata insurance cover lifts, pumps and gate motors breaking down? Machinery breakdown
- What is catastrophe cover in strata insurance?
- Does strata insurance cover loss of rent and temporary accommodation?
- Does strata insurance cover government audit costs?
- Does strata insurance cover legal defence costs?
The seven at a glance
Two strata policies that look alike on a quote can pay very differently at claim time. The difference sits in sections like these seven.
Each insurer's policy document, called its wording, sets which of the seven are automatic and which the scheme must select. On one wording, every section, the building included, is chosen from a menu, so a section left off the schedule is not there.
None of the seven makes up for a building sum insured that is short. In a total loss, what the policy does not pay falls to the owners, commonly through a special levy. The building sum insured, the excesses, the exclusions and how we arrange the policy are on our residential strata insurance page.
| Cover | What it protects | What we check |
|---|---|---|
| Office bearers liability | Committee members facing personal claims | The limit, whether defence costs sit inside it, and any known dispute |
| Fidelity guarantee | Scheme money stolen or misused by an insider | The limit and the payment controls |
| Machinery breakdown | Plant failing from within | Whether the schedule shows a sum insured, and the lift maintenance agreement |
| Catastrophe cover | Higher rebuilding costs after a declared catastrophe | Selection, the figure and any value test |
| Loss of rent and temporary accommodation | Rent or a place to live after insured damage | The schedule limits and how long they last |
| Government audit costs | Professional fees for responding to an audit | The limit and when the matter must be notified |
| Legal defence expenses | Certain defence costs for the scheme | The scope, the excess and any contribution |
Does strata insurance cover committee members? Office bearers liability
Yes, where the schedule carries the section. Office bearers liability protects committee members when a claim is made against them personally over a decision or action taken running the scheme. A dispute over a renovation, a levy or a complaint can stop being a body corporate matter once a committee member is named.
There is no standard limit: it is set on the schedule. The section can also be optional. Check it was selected.
Defence costs come out of that limit on most of the policies we place. The lawyers' fees are paid from the same figure as any settlement. A limit that looks generous can run down before the claim is resolved.
On every policy we place, the cover is claims made. What counts is when the claim is first made and notified, which can be long after the committee's decision. Past office bearers are covered too. A claim made after you leave the committee can still fall under the scheme's policy in force at the time. A schedule may also set a retroactive date, a start date for the cover. A decision made before it is not covered.
That timing decides what happens when the scheme changes insurer. A dispute the committee already knows of needs notifying to the old insurer before its policy ends, or the claim can fall between the two policies.
Does strata insurance cover fraud or theft of body corporate funds? Fidelity guarantee
Yes, though on some wordings it has to be selected. A body corporate can hold significant money across its administrative and sinking funds. Fidelity cover responds if that money is stolen or fraudulently misused by someone inside the scheme, such as an office bearer, a committee member or the manager.
The time to report a loss is limited too. Some wordings exclude a loss found more than 12 months after the policy ends, and one wants notice within 90 days of finding it.
Fraud is not always somebody taking money from the fund directly
In a payment-redirection fraud, someone posing as the strata manager or a supplier tricks the committee into paying a fake invoice. Whether it is covered depends on the wording. Where it is covered, it may sit in the fidelity section, in a cyber section or in the building section as a benefit. The fidelity limit alone does not show whether the scheme has it.
The cover can also turn on a payment check. A wording can require the scheme to follow its agreed check, such as a call-back, before acting on a payment instruction. If the scheme did not, the insurer can reduce the payout to the extent the missed check harmed its position. Under another wording, confirming new or changed bank details by phone with a known contact before money moves is a condition of cover. Skipping that step can defeat the claim outright.
Does strata insurance cover lifts, pumps and gate motors breaking down? Machinery breakdown
Only where the schedule shows a sum insured for it. Machinery breakdown is for plant serving the common property that fails from within: pool pumps, gate motors, pressure systems, lifts and similar equipment. Damage from outside, such as fire or storm, sits under the property cover.
On one wording it is an optional extra, selected and priced separately. A scheme that moves insurer can lose it without noticing. If the new schedule does not carry the section or a limit, a pump or lift that fails is not covered.
One optional extension can pay lost rent or temporary accommodation if an insured machinery breakdown makes the lot or common area unfit for its intended use. The breakdown must last more than seven days. Once that condition is met, eligible payments run from the time of breakdown until repair or replacement. Unless the insurer agrees otherwise in writing, payment is limited to 20 per cent of the sum insured for that extension and no more than 30 days following the breakdown.
On some wordings, lift breakdown cover needs a current comprehensive maintenance agreement with a qualified provider. A lapsed agreement can cost the scheme its lift claim. One wording covers a lift only for its gearbox and its electrical or electronic parts.
What is catastrophe cover in strata insurance?
Catastrophe cover is extra money for rebuilding after a declared catastrophe, when builders and trades can be scarce and costs can rise sharply. The normal building section pays only up to the building sum insured. What switches catastrophe cover on varies: an insurance industry catastrophe declaration on some wordings, a government state of emergency on one. A large claim on its own does not.
On most of the wordings we place, catastrophe money only starts after the ordinary building sum insured has been used. It is a top-up, not a second full building limit.
How much extra it adds differs by policy: a percentage of the sum insured, or an amount or percentage set on the schedule.
On some wordings it is optional, selected and paid for separately. Some wordings pay it only if the building is destroyed or written off, and some pay nothing unless the scheme rebuilds.
What happens if the strata building is already underinsured?
Some wordings add a value test: catastrophe cover pays only if the building sum insured was at least 80 per cent of the rebuild cost immediately before the catastrophe. Below that, the scheme gets none of it.
Even without that test, a sum insured below the real rebuilding cost still caps the ordinary building claim. Where the top-up starts only once the building money is spent, it starts from a figure that was already short, and the owners fund the gap.
Does strata insurance cover loss of rent and temporary accommodation?
Yes, but they protect different people. Loss of rent is for the owner of a tenanted lot that cannot be let after insured damage. Temporary accommodation is for a resident who has to live somewhere else while the lot is uninhabitable.
The ceiling for each is usually a figure on your schedule. It can be a fixed percentage of the building sum insured instead. A separate yearly figure on the schedule can also cap a group of these extensions, and then that figure is the real ceiling.
A smaller emergency accommodation benefit pays for the first nights away, from $1,500 to $2,500 per lot on the policies we place. It may be paid only where the owner lives in the lot as their home, so a tenanted lot gets nothing from it.
Short-stay lots are treated differently again. One wording measures lost rent on a short-stay lot from its past booking income. Another ties rent cover to a residential tenancy agreement, so rent from a short-stay arrangement may not be recoverable.
This cover does not replace a lot owner's own contents or landlord insurance, and rent above the scheme's cap is the owner's to insure. For a tenanted unit, see our residential landlord insurance page.
Does strata insurance cover government audit costs?
In some form, on every policy we place. The body corporate may face an audit or investigation by the Australian Taxation Office or another authority. Unless the policy covers it, the scheme pays the professional fees for answering it.
Timing differs by policy. Most wordings treat this group of covers as claims made and notified. Under one, the audit must first be notified to the body corporate during the policy period. Some wordings allow a limited reporting period after the policy ends, subject to conditions. Tell your broker about an audit promptly, and check the notification requirements before changing insurer.
Does strata insurance cover legal defence costs?
Certain legal costs, yes, for the body corporate, including litigation about the common property and appeals involving workplace health and safety notices. It usually sits in the same section as audit costs and runs on the same claims-made timing.
The scheme may also have to pay a share of what is left after the excess when it defends litigation against the body corporate. Your schedule shows whether yours does, and how much.
A wording can set two conditions before the scheme spends on an audit or a case. The insurer's written consent is needed before costs are incurred. A committee that instructs its own solicitor first and tells its broker afterwards can break that condition. And the insurer funds a defence or appeal only where it considers there are reasonable prospects of success. A case the insurer will not back may be left for the scheme to fund.