12 Common insurance mistakes trustees make

[Updated: 30 October 2025]

Trustees often make insurance errors or omissions, not through negligence, but simply because volunteer trustees cannot be expected to know everything. This article highlights twelve common insurance pitfalls and can serve as a practical checklist for trustees to reference and discuss at meetings.

1. Overlooking fidelity cover

Trustees naturally focus on buildings as the primary risk to insure. However, this is only one of three main areas that need to be properly covered. Fidelity cover is an equally important component required under the CSOS Act Regulation 15. Trustees need to ensure that the correct level of cover is in place, calculated according to the prescribed formula. All too often, schemes rely on a standard R50,000 “fidelity section,” which is inadequate and leaves the scheme and trustees exposed to unnecessary risk.

2. Failing to obtain written insurance advice

Trustees should ensure that their insurance adviser provides written advice at least annually, at policy renewal, covering buildings, liability and fidelity. FAIS legislation requires that such advice is provided in writing. Having written records on file helps trustees demonstrate that they considered professional advice and arranged appropriate cover should a dispute arise at claim stage.

3. Taking replacement values too lightly

A professional valuation should be obtained at least every three years, as required by law. It is equally important that the information from the valuation is accurately transcribed into a compliant schedule of replacement values (SRV). In practice, a properly prepared SRV is often missing or incomplete, creating the risk of underinsurance or disputes later on.

4. Not appointing a reputable managing agent

While sometimes a sensitive topic, it remains important for schemes to be managed by competent, registered managing agents. Working with an agent registered with the Property Practitioners Regulatory Authority (PPRA), who carries professional indemnity cover and ideally has additional commercial crime and cyber liability cover, provides trustees and owners with an extra layer of protection.

5. Neglecting safety in common areas

Common areas often present hidden liability risks – uneven paving, loose bricks, broken tiles or tree roots lifting walkways can easily result in injury or damage. Swimming pool areas, in particular, are often unsafe, with gates that do not self-close. Regular walkabouts and inspections can help trustees identify potential hazards before they become claims.

6. Choosing the cheapest premium

The lowest premium does not necessarily offer the best value. Lower premiums often come with higher excesses, reduced benefits or exclusions that increase long-term risk. In some cases, unrealistically low premiums can lead to policy cancellations down the line. Trustees should aim for stable, sustainable premiums and work with brokers who take a long-term view and can explain claims ratios and policy structure.

7. Using a broker unfamiliar with community schemes

Many brokers licensed to advise on property insurance are not familiar with the complexities of sectional title insurance. It involves more than insuring buildings – fidelity, liability, exclusive use areas, and multi-unit claims processes all require specialist understanding. Trustees should engage with a broker who specialises in community schemes and has the systems, experience and service capacity to meet those needs.

8. Assuming existing insurance is adequate

New trustees often assume that the existing policy is adequate and correctly structured, which is not always the case. Standard policies may exclude retaining walls, subsidence, landslip, and other essential extensions. Trustees should review cover periodically and consider whether additional risks such as power surge protection, geyser cover enhancements or other extensions are relevant to their scheme.

9. Overlooking exclusive use areas (EUAs)

Exclusive use areas are frequently misunderstood or incorrectly insured. With assistance from a qualified valuer and a broker experienced in sectional title, improvements to EUAs can be properly recorded on the SRV and adequately covered. This also allows for correct premium recovery where applicable, for example, an EUA garden with a timber deck or private pool.

10. Not understanding how to prevent claim rejections

Policies generally exclude losses that could have been avoided through reasonable maintenance or preventative measures. Examples include unmaintained waterproofing, corroded roof sheeting, or unsafe structures. Trustees should be aware that a lack of maintenance can invalidate claims and that ongoing maintenance plays a vital role in maintaining valid insurance cover.

11. Assuming insurance covers occupational health and safety (OHS) risks

It is sometimes incorrectly assumed that sectional title insurance policies cover OHS fines or penalties. They do not. Non-compliance that leads to injury on common property can amount to a criminal matter, and criminal acts or fines are specifically excluded. OHS compliance should be handled separately, ideally with guidance from a suitably qualified safety consultant.

12. Misunderstanding water damage claims

Many disputes arise when claims for old, corroded pipes, rusted roofs or failed waterproofing are rejected. These are typically excluded as gradual deterioration or wear and tear, not sudden or unforeseen events. A good insurance adviser will help trustees understand what is covered and what is not, and assist with planning maintenance and budgeting accordingly.

In closing

Although this list could be extended, these twelve areas represent the most common and costly oversights made by trustees. The intention is to encourage trustees to work closely with their broker and managing agent to ensure that the scheme remains well protected and compliant.

Many of these topics are explored in Addsure’s short explainer videos available on the Addsure YouTube channel (see the blue button below).