Small strata insurance deals with a situation that looks simple and often is not: two or three owners sharing one building, frequently without a strata manager, sometimes without ever having held a meeting. A strata-titled duplex still has common property, a shared roof or wall, and an owners corporation or body corporate that generally exists once the plan is registered, whether or not the owners ever use it. Our guide to residential strata insurance explains how larger schemes insure. This post deals with the smaller ones.
First, Check the Title
Not every duplex is a strata scheme. The title decides who insures what.
- Strata title. The building and common property usually sit with the owners corporation, which insures them. Each owner insures their own contents and improvements.
- Torrens title with a shared wall. Each owner owns their own land and their half of the building, and insures it themselves. Easements or a party wall arrangement may affect how a shared wall is treated.
- Community title or other arrangements. These work differently again, and terminology differs by state.
If you are unsure, the title search and the registered plan will answer it. A conveyancer or solicitor can confirm how your property is held.
Does a Small Scheme Have to Insure?
Whether a small scheme must insure the building, and on what terms, is set by strata legislation. Requirements vary by state, some legislation has separate provisions for small schemes, and the rules change over time. Check the current legislative requirements for your state before assuming that the rules for large buildings apply, or that no rules apply at all.
Whatever the law requires, the practical question is the same. If the building burns down, will there be one pool of money to rebuild all of it, on one timetable?
Informal Arrangements Between Owners
In small schemes, owners sometimes each take out a home policy on “their half” and never think about the owners corporation. That can leave gaps:
- The wrong kind of policy. Some home policies are not designed for a lot in a strata scheme, and the insurer may see the building as the owners corporation’s property rather than the owner’s.
- Common property falls between policies. The roof, the driveway, boundary fences, footings, shared services and the shared wall may not clearly belong to either owner’s policy.
- Mismatched cover. Different insurers, sums insured, excesses and definitions. After a fire that affects both halves, there are two assessments and two timetables for one building.
- Lapses nobody knows about. One owner stops paying and the other finds out after the storm.
- Liability for shared areas. A visitor who trips on the common driveway may bring a claim against the owners corporation, not an individual owner.
One Policy or Two
A single strata policy in the name of the owners corporation insures the whole building for one sum insured, with one insurer, one claim process and one excess. It can include public liability for common property and, depending on the policy, office bearers’ liability, fidelity and voluntary workers sections. Owners share the premium as their scheme’s lot entitlements or the legislation provide; check what applies to you.
Two separate policies can work only where the title and the legislation allow it, and where both policies are written on the right basis for the property. Even then, the owners carry the coordination risk. For small schemes our general view is that one policy is simpler to hold and simpler to claim on, but the right answer depends on the title, the building and your state’s rules.
Disputes After a Claim
Small schemes are close relationships, and a claim can test them. Common flashpoints:
- A leak from one lot damages the other. Who lodges, and who pays the excess?
- One owner wants to repair quickly; the other wants to wait or to argue scope.
- One owner refuses to agree to a claim at all.
- The claim affects the premium both owners pay at renewal.
Agree on the process in writing before anything happens: who deals with the insurer, how decisions are recorded, how the excess is shared, and whether a small repair fund is kept. By-laws or state legislation may deal with some of these points, so check what applies. Our article on the strata insurance claims process explains the steps, and our post on body corporate insurance in Queensland covers how the terminology works there.
Valuations for Small Schemes
The sum insured should reflect the cost of rebuilding, not the market value of the properties. In small schemes, land often makes up a large part of what a duplex sells for, and owners can be misled in either direction by sale prices.
A rebuilding figure should allow for demolition and removal of debris, professional fees, current building standards, and cost increases during the rebuild. A qualified valuer or quantity surveyor can provide it. Revalue periodically and after any extension or major renovation. Some states set valuation requirements for strata schemes; check the current requirement for yours. Our guide to underinsurance and co-insurance explains what happens when the figure is too low.
Setting Up Small Strata Insurance
- Confirm the title type from the registered plan.
- Check the current legislative requirements for small schemes in your state.
- Obtain a rebuilding valuation.
- Arrange one policy in the name of the owners corporation, unless title and law clearly support another approach.
- Include public liability for common property.
- Agree in writing how claims, excesses and renewals are handled.
- Tell each owner’s lender about the arrangement, since mortgagees commonly ask to see evidence of building cover.
- Each owner arranges their own contents, improvements and, where they rent the lot out, landlord cover.
For how strata policies are built generally, see our strata insurance page, and for the building cover itself our residential strata page.
Common Questions
Can we each just take out home insurance on our half?
It depends on the title and the legislation in your state. For strata-titled property, the building is usually the owners corporation’s to insure, and a home policy on a lot may not respond as expected.
Who pays the excess if the leak came from my neighbour’s bathroom?
That depends on your scheme’s by-laws, any agreement between owners and the rules in your state. Agree on it before a claim, not during one.
Do we need a strata manager to insure the building?
No. Small schemes can arrange cover directly through a broker. Someone still needs to be responsible for renewals, payments and records.
Talk It Through
Request a strata quote or call 1300 983 940 and we will help the owners of your scheme set up cover that suits the title and the building.
General advice only. This article does not take your objectives, financial situation or needs into account. Consider the relevant PDS and Target Market Determination before deciding on a policy.