Tips to help ensure cover for sectional title properties, and residents, is exactly what is needed
Sectional title insurance can be a little confusing, and new owners may be tempted to assume body corporates have it all covered.
Although this may be the case, understanding the extent of one’s coverage and personal liability is the only guaranteed way owners can protect themselves against potentially costly oversights.
They do not, however, need to be insurance experts, says Bill Rawson, chairman of the Rawson Property Group, who suggests they pay close attention to these five need-to-know factors.
1 Who pays for sectional title insurance?
This insurance is a legal requirement for all developments. The costs are typically shared by all section owners and are factored into the monthly levies, Rawson says.
“They are then paid out of these pooled funds by the body corporate.”
While the cost of this insurance is shared, it’s not necessarily shared equally, and contributions are typically based on a unit’s participation quota.
However, exceptions to this rule can be made if a particular unit’s replacement value has increased, and the owner – or their bank – wants to ensure they are adequately covered.
2 What does sectional title insurance cover?
“At the very least, your sectional title insurance should cover all residential sections and common property for their full replacement value in the event of damage or destruction from things like fire, flooding, earthquakes, burst pipes and rioting,” says Rawson.
“The body corporate can extend that basic coverage to include things like third-party liability, or the cost of alternate accommodation if a section becomes uninhabitable due to an insured event.”
Rawson says this can be a good idea but needs to be agreed upon by all parties.
3 How to cover the rest
It is “extremely important” to note that sectional title insurance only covers the brick and mortar part of residential sections and common property, Rawson says.
“It excludes any moveable contents like furniture and decor pieces, which must be insured by section owners or their tenants in their private capacity.”
4 Keeping your coverage current
As with any other type of insurance, sectional title policies need to be reassessed and updated annually. Section owners are advised to check this happens at their body corporate’s AGM.
“Most specialist sectional title insurers offer complementary valuations for new policies,” says Rawson, but these should be revisited by the body corporate before every AGM. This provides an opportunity to adjust coverage for things like inflation, rising building costs and improvements to common property or individual units.
5 Understanding your excesses
Even the best insurance will have excesses that need to be paid by somebody. Rawson says the standard rule is that the section owner who is claiming from insurance must pay the excess. This can, however, cause disagreements in some situations.
“There are cases where damage to one unit is caused by another unit. For example, if a tap is accidentally left on and water floods into the unit below.”