Composition of the sectional title policy

A typical building’s policy comprises two parts: the policy wording and the policy schedule. Sometimes a third part, a schedule of replacement values, is attached, although often taken as part of the actual policy schedule.

Policy wording

The policy wording is static and rarely amended. It is the policy wording which dictates what is and what is not covered.  It is usually divided into sections and defines the cover. It also sets out conditions of cover and exclusions that apply, i.e. what is covered conditionally and what is not covered.

Policy schedule

The policy schedule is what we like to call “the variable part of the policy”, i.e. the part that sets out the situation, benefits and sections applicable and/or selected. It reflects the sums insured, limits, excesses and premiums applicable. The schedule is important in the sectional title environment as it is endorsed with much more important information. For example, sectional title regulations or prescribed rules require that each unit’s replacement value, totalling the sum insured, should be reflected. Noting of the bank’s interest and any other policy conditions are also shown in the schedule.

CIA (Commercial and Industrial Acceptances) defines the meaning of policy within their wording as:

“It means this document and the most current schedule, which may be in electronic or printed format”.

The policy wording remains fairly static and only changes now and again, and in which case it would apply to all policyholders. The policy schedule changes at least once a year upon renewal, but most often, several times during the year, e.g. where the bank’s interest is noted, terms amended, new sums insured approved after valuation, etc.

PQ schedule

A third component or attachment is often shown in some policies separately as a “PQ schedule”. The word “PQ schedule” in this context is technically incorrect, as the actual PQ schedule is found in the sectional plan itself.  The policy schedule should include an endorsement reflecting a mirror image of the official schedule of replacement values (SRV) as approved by the body corporate and alluded to in previous blogs on this website. UMAs or insurers should rather be naming this endorsement to their schedules as “Endorsement schedule of replacement values” or “SRV schedule” or something similar.

When owners wish to see a copy of the policy, they should be provided with both the policy wording plus the latest policy schedule.