Strata insurance is a pivotal consideration for any investor involved with strata-titled properties in Australia. This type of insurance is legally required and provides coverage for the common property and shared areas within a strata scheme, such as apartment buildings or townhouse complexes.
Strata insurance policies typically cover the building's structure, including fixtures like wiring, plumbing, and balconies under Division 43 for capital works. These policies also cover common areas such as gardens, pools, and driveways. Importantly, strata insurance includes public liability cover for injuries that occur on common property. However, it does not cover contents within individual units.
A common misconception is that strata insurance covers everything within the unit, including personal belongings. This is incorrect. Unit owners need to take out their own contents insurance to protect personal items like furniture, electronics, and clothing.
To see how this plays out, consider a 2015-built apartment complex in Parramatta, Sydney, valued at $800,000 per unit. The strata insurance policy covers the entire building structure and common areas, with an annual premium of $12,000 split among the 20 units. If a storm damages the roof, the strata insurance covers repairs, eliminating additional costs for individual owners. However, if a unit owner’s furniture is damaged, they must claim through their personal contents insurance.
In our experience reviewing thousands of properties across Australia, investors often overlook the importance of reviewing their strata agreements closely. Many assume all aspects of the property are covered, leading to unexpected expenses. Another frequent oversight is failing to budget for potential increases in insurance premiums, which can impact cash flow.
The answer can differ depending on your situation. For instance, the coverage requirements for a commercial strata property differ significantly from residential ones, often requiring additional policies. Properties in flood-prone areas may also need supplementary flood insurance. Furthermore, the specific coverage can vary based on the state regulations and the strata scheme's by-laws.
Given these nuances, it's wise to consult both a Chartered Quantity Surveyor and an insurance specialist. They can ensure that the strata insurance is comprehensive and aligns with your investment strategy and risk tolerance.