What does residential strata insurance cover? 7 covers worth checking
Quick answerResidential strata insurance covers the building and common property, plus liabilities and financial risks that sit with the body corporate or owners corporation. Beyond building damage, a policy can include office bearers liability, fidelity, machinery breakdown, catastrophe costs, temporary accommodation or lost rent, audit costs and legal defence. Cover depends on the policy and schedule.
We compared six residential strata policy wordings
CIB reviewed six residential strata insurance wordings that we currently place, cover by cover. All six provide these seven protections in some form, but they do not all work the same way. The differences include the limit, what triggers the cover, whether it must be selected, and what appears on the schedule.
That is the point of this guide: not simply to list what strata insurance can cover, but to show what we would actually check when comparing policies for a residential scheme.
Looking for a quote, pricing examples, excesses or help checking the building sum insured? See our residential strata insurance page.
The seven at a glance
| Cover | What it protects | What we check |
|---|---|---|
| Office bearers liability | Committee members facing personal claims | Limit and known disputes |
| Fidelity guarantee | Scheme funds lost through theft or fraud | Limit and payment controls |
| Machinery breakdown | Plant failing internally | Whether cover and a limit are shown |
| Catastrophe cover | Higher rebuilding costs after catastrophe | Selection, limit and any value test |
| Loss of rent / temporary accommodation | Rent or accommodation after insured damage | Schedule limits and duration |
| Government audit costs | Professional fees responding to an audit | Limit and notification timing |
| Legal defence expenses | Certain defence costs for the scheme | Scope, excess and any contribution |
Does strata insurance cover committee members? - Office bearers liability
Yes. Office bearers liability protects committee members when a claim is made against them personally for decisions or actions taken while running the scheme. A dispute over a renovation, levy or complaint can become more than a body corporate issue if an individual committee member is named.
All six wordings we reviewed have a specific office bearers section. None prints one standard limit across every policy; the limit comes from the schedule.
The important detail is that all six are claims-made. In simple terms, when the claim is first made and notified matters, not just when the committee made the original decision. A change of insurer can therefore matter if a dispute is already developing and nothing has been notified under the earlier policy.
All six wordings reach past office bearers, so resigning from the committee is not, by itself, the gap. The timing of the claim and notification is the part to understand.
What we check: the office bearers limit and whether there is any known dispute or circumstance that needs to be considered at renewal.
Does strata insurance cover fraud or theft of body corporate funds? - Fidelity guarantee
A body corporate can hold significant money across its administrative and sinking funds. Fidelity cover is designed to respond if that money is stolen or dishonestly misused by someone such as an office bearer, committee member or manager. All six wordings carry the cover, with the limit set on the schedule.
Fraud is not always somebody taking money from the fund directly
Three of the six wordings also address impersonation or payment-instruction fraud. One deals with it inside the fidelity section. Another uses a separate cyber section for social engineering, phishing and other cyber fraud. A third carries it as a benefit inside the building section.
On one wording, payment controls matter to the claim. If the scheme fails to follow an established authentication process, pre-arranged callback or another agreed check before acting on a payment instruction, the insurer can reduce the payout to the extent it was prejudiced by that failure. On another the control is harder still: validating new or amended bank details by telephone with a known contact before funds move is a condition of cover, which can defeat a claim rather than only reduce it.
What we check: the fidelity limit against the amount the scheme holds, and whether payment verification procedures match the policy conditions.
Does strata insurance cover lifts, pumps and gate motors breaking down? - Machinery breakdown
Machinery breakdown is for internal failure of plant serving the common property: lifts, pool pumps, gate motors, pressure systems and similar equipment. The distinction is important. External insured damage, such as fire or storm damage, sits under the property cover. Machinery breakdown deals with the equipment failing from within.
All six wordings have a machinery or equipment breakdown section, but on none of them does the cover work without a sum insured on the schedule. One treats it as a separately priced optional extension. On the other five the cover still depends on the schedule showing a sum insured for it.
That means a scheme can move between policies and assume the same plant is covered when the new schedule does not actually carry the section or limit.
One optional wording also puts its own limits on the consequences of a breakdown. Loss of rent or temporary accommodation begins only after the breakdown has continued for seven days, is capped at 20 per cent of the extension's sum insured, and is limited to 30 days.
What we check: what plant the scheme relies on and whether the schedule actually carries machinery breakdown cover and an adequate limit.
What is catastrophe cover in strata insurance?
After a declared catastrophe, builders and trades can become scarce and rebuilding costs can rise sharply. The normal building section pays up to the building sum insured. Catastrophe cover is designed to provide additional money where rebuilding after the event costs more than expected.
The six policies we reviewed handle this in different ways:
- one can add up to a further 15 per cent of the buildings and common contents sum insured, or the amount shown on the schedule;
- two pay the difference between the actual rebuilding cost and the greater of the pre-catastrophe estimate or the building sum insured, each up to its own schedule figure, and on one of those two the building has to be destroyed or written off before the section responds;
- one pays the increased cost of replacing the building, up to the figure on its schedule, but only if the building is destroyed or written off, only once the building sum insured has been spent, and not at all unless the scheme rebuilds;
- on two of the six, including one of those above, catastrophe cover is optional and has to be selected; and
- one applies the benefit only if the building sum insured was at least 80 per cent of the reinstatement cost immediately before the catastrophe.
On five of the six, catastrophe money only starts after the ordinary building sum insured has been used. It is a top-up, not a second full building limit.
What happens if the strata building is already underinsured?
On the wording with the 80 per cent test, catastrophe cover does not respond if the building sum insured falls below that threshold. The 80 per cent figure is a condition for the benefit to apply, not the percentage of the claim that will be paid. The other five set no such test for catastrophe cover, but a sum insured below the real rebuilding cost still caps the ordinary claim, and on five of the six the catastrophe money only begins once that capped amount has been spent.
What we check: whether catastrophe cover is selected, the catastrophe limit, and whether the building sum insured is strong enough for any minimum-value test in the wording.
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 limits are where the detail matters. On one wording, each benefit can be expressed as up to 30 per cent of the building sum insured, but a separate aggregate figure on the schedule applies across a group of extensions for the year. That schedule figure is the real ceiling. The same wording also has a narrower emergency-accommodation benefit, capped at $2,500 per unit while a lot is uninhabitable or inaccessible, and payable only where the owner lives in the lot as their primary residence. A tenanted lot gets nothing from it. That wording and one other calculate temporary accommodation by reference to the lot's annual rentable value.
This cover does not replace a lot owner's own contents or landlord insurance. For a tenanted unit, see our residential landlord insurance page.
What we check: how many lots are tenanted, the accommodation and rent limits on the schedule, and whether they are realistic for a lengthy rebuild.
Does strata insurance cover government audit costs?
It can. If the body corporate faces an audit or investigation by the Australian Taxation Office or another authority, the professional fees involved in responding can be substantial. All six wordings we reviewed include government audit costs in some form.
Five combine audit costs, workplace health and safety appeals and legal defence within one section. One separates them into three. Either way, the limit comes from the schedule.
Timing matters here too. Five wordings expressly operate on a claims-made-and-notified basis. On the sixth, the audit must first be notified during the policy period, which creates a similar practical timing issue. One wording also provides up to $30,000 of claim-preparation costs across several other sections but specifically excludes this one.
What we check: the audit-cost limit and how the wording requires the matter to be notified.
Does strata insurance cover legal defence costs?
Residential strata policies can also cover certain legal defence costs for the body corporate, including litigation and appeals involving workplace health and safety notices. This cover is commonly linked to the same part of the policy as government audit costs and uses similar claims-made timing.
Three wordings require the scheme to pay a contribution on top of the ordinary excess when defending litigation against the body corporate, worked out on what is left after the excess comes off. The schedule sets the percentage: one wording says up to 10 per cent, another shows a 20 per cent worked example. That can materially increase what the scheme pays itself on a long-running matter.
What we check: what legal matters the section actually covers, the limit, the excess and whether an additional contribution applies.
What this guide does not cover
This guide is about the less-obvious sections and wording differences. For the building sum insured, what happens when it falls short, general exclusions, pricing examples and how CIB arranges cover, see our residential strata insurance page.
Want somebody to read your scheme's cover against these seven?
Send us the schedule and certificate of currency. We can review the cover, limits and building sum insured and explain in plain English what stands out. No cost, no obligation.