There is no list price for strata insurance. Strata insurance cost is set scheme by scheme, based on what it would cost to rebuild the building, how it is built and maintained, what has been claimed before, where it sits and who occupies it. Two buildings on the same street can price very differently. Understanding what drives the premium is the first step to influencing it, and it helps committees explain a renewal to owners who only ever see the levy notice. Our strata insurance page covers the cover itself. This article is about the price.
What Drives Strata Insurance Cost
An underwriter builds a strata premium from a set of risk factors. These are the ones that matter most.
Building Sum Insured
The premium is calculated against the building sum insured, so the rebuild cost of the building is the foundation of the price. That figure should come from an insurance valuation, and it will usually rise over time as construction costs rise. When a valuation catches up after several years without one, the jump in the sum insured, and in the premium, can be significant.
The alternative is worse. An understated sum insured keeps the premium down until the day of a major loss, and then the owners fund the shortfall.
Construction Type and Age
Masonry and concrete buildings are generally viewed more favourably than those with combustible materials in walls, roofs or balconies. Age matters because of plumbing, wiring and roofing. An older building with original pipework, ageing switchboards or a roof nearing the end of its life is more likely to produce claims. Upgrades should be documented and disclosed, because an underwriter cannot credit work they do not know about.
Cladding and Defects
Combustible cladding has changed how underwriters approach strata risk. A building with identified combustible cladding may face restricted cover, higher excesses, fewer markets willing to quote, or all three. A documented remediation plan, fire engineering reports and evidence of progress all help.
Known building defects such as waterproofing failures, cracking and concrete cancer work the same way. Insurers are cautious about damage that stems from a defect already on the record.
Claims History
Past claims are a strong indicator of future claims, and underwriters treat them that way. Water damage is the pattern that hurts strata schemes most often: repeated burst flexible hoses, leaking showers, failing risers, blocked stormwater. Individually modest, together they signal a building that will keep claiming. Underwriters respond with higher premiums, higher water damage excesses or both.
A single large fire claim may be viewed as a one-off. A steady stream of water claims is viewed as a trend.
Location and Natural Hazards
Flood, bushfire, cyclone, storm and coastal exposure are rated using detailed hazard mapping. A scheme in a cyclone region or a mapped flood area carries a natural hazard loading that the committee cannot negotiate away. Mitigation work such as roof tie-downs, raised plant and switchboards, flood barriers and cleared gutters may be recognised by some underwriters, and is worth documenting either way.
Occupancy
Owner-occupied residential schemes, investor-heavy schemes, short-stay letting and commercial or hospitality lots all rate differently. A restaurant on the ground floor or widespread short-term letting changes the fire and liability profile of the whole building. Our page on residential strata insurance covers how purely residential schemes are approached.
Cover Selections, Limits and Excess
Higher public liability limits, larger office bearers’ and fidelity limits, machinery breakdown, catastrophe cover and flood all add premium. They are often worth having. The point is that the premium reflects what the scheme has chosen to insure, and the excess it has chosen to carry, so quotes need to be compared on the same basis.
Why Strata Premiums Rise Even Without Claims
Owners often ask why the premium went up when the building made no claims. Several reasons sit outside the scheme’s control:
- Construction costs. The building sum insured tracks rebuild cost, so the premium follows it even if the underlying rate stays the same.
- Reinsurance. Insurers buy their own insurance, and the cost of that cover, driven by natural catastrophe losses in Australia and overseas, flows through to premiums.
- Natural hazard repricing. Updated flood and bushfire mapping can reclassify a building’s risk without anything about the building changing.
- Taxes and charges. GST and stamp duty are calculated on top of the base premium and move with it.
Separating the part of an increase that comes from the sum insured from the part that comes from the rate helps a committee explain the renewal to owners and target the right fix.
Levers an Owners Corporation Controls
The committee cannot move the building, but it can change a good deal about how the building presents to an underwriter.
Keep Valuations Current
Regular professional valuations prevent both underinsurance and the shock of a large catch-up adjustment. Several states set a minimum valuation interval. Check what applies to your scheme and consider whether more frequent reviews make sense when building costs are moving. Our guide to underinsurance explains why an understated sum insured is a false economy.
Run a Maintenance Plan and Show It
A capital works or sinking fund plan that is funded and followed is evidence of a well-run building. Roof inspections, gutter clearing, pipework replacement programmes, balcony and balustrade checks and fire safety maintenance records all strengthen the submission to underwriters.
Manage Water Leaks Deliberately
Because water damage is such a common source of strata claims, it is where schemes usually have the most room to improve.
- Replace flexible braided hoses in common areas on a schedule, and encourage owners to do the same within their lots, using by-laws where the legislation allows.
- Investigate the cause of each water claim, not just the damage. Repeat leaks from the same stack or riser point to a building issue.
- Consider leak detection and automatic shut-off devices in plant rooms and other high-risk areas.
- Treat failed waterproofing as maintenance before it becomes a pattern of claims.
Choose the Excess Deliberately
A higher excess lowers the premium and keeps small claims off the scheme’s history. The trade-off is that the owners corporation, or the responsible lot owner where by-laws allow, carries more of each smaller loss. Model it against the scheme’s actual claims record rather than guessing, and make sure the administrative fund can absorb it. Our article on how an insurance excess works sets out the mechanics.
Think Before Lodging Small Claims
A claim that recovers only a modest amount above the excess can cost more across the next few renewals than it recovered. Discuss borderline claims with your broker first. Never delay notifying an incident the policy requires you to report, and never hold back information the insurer is entitled to.
Address Known Risks Before Renewal
Cladding assessments, defect rectification and fire safety upgrades take time. Starting them, and documenting progress, before renewal gives the underwriter something concrete to work with.
Spread the Cost With Premium Funding
Premium funding does not reduce the premium. It spreads it into instalments, at a cost, so the scheme is not paying a large sum up front from the administrative fund. For some schemes it smooths cash flow between levy periods. See insurance premium funding.
How to Compare Strata Quotes Fairly
- Use the same building sum insured across every quote.
- Compare every excess, including water damage, earthquake and natural hazard excesses.
- Check which sections are included, optional or excluded, particularly flood and machinery breakdown.
- Read the catastrophe, temporary accommodation and fixtures limits.
- Ask how claims are handled and who manages them on the scheme’s behalf.
The lowest premium on a different basis is not a saving. It is a different policy. A broker who knows the full range of strata insurance cover can line quotes up section by section so the committee compares like with like.
Common Questions
How much does strata insurance cost?
There is no list price. The premium depends on the building’s rebuild cost, construction, condition, location, claims history, occupancy and chosen excess, and is quoted for each scheme individually.
Why did our premium rise when we made no claims?
Usually a mix of higher rebuild costs, reinsurance costs and natural hazard repricing. Ask your broker to separate the sum insured change from the rate change.
Will a higher excess always reduce the premium?
It usually does, but the saving varies. Weigh it against the scheme’s claims history and its ability to fund the excess before deciding.
Can one lot owner’s claims affect everyone’s premium?
Yes. Claims are recorded against the scheme’s policy, so repeated damage originating in one lot becomes part of the whole building’s history.
Talk It Through
Request a strata quote or call 1300 983 940 and we will walk the committee through what is driving the premium and which levers are worth pulling.
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.