Bodies corporate comprising of two units, also known as duets, can be very challenging when it comes to insurance.
Owners often don’t realise that they each own, in proportion to their participation quota, the respective proportions of the roof, grounds, boundary walls, outside walls of all the buildings.
In terms of the Sectional Title legislation, the body corporate needs to insure the buildings and all improvements to the common property as well as against liability in respect of the common property. It makes sense that one policy must cover the buildings and improvements as a whole. The two units are bound together, like pieces of a two piece puzzle. Therefore, if each owner wants to arrange their own insurance, it needs to be dealt with in a particular way. An analogy is that it is as difficult to separate the risks; sort of like trying to unscramble an egg.
Sectional Title owners may insure their own sections, notwithstanding the body corporate’s policy of insurance. This does not mean that two individual policies covering sections deal with the insurance; what about the common property, the outer skins of the buildings, roof structures, etc?
Rules may have been created to let the owner of each section take care of the building in which they are housed, i.e. maintain their own building. These rules should be checked, especially to see where this may affect insurance premiums. Owners need to agree as to how premiums will be shared, especially where buildings have different replacement costs per square metre. By default, premiums are shared according to the participation quota as the rate per square metre includes the common property elements of the building.
The body corporate is always the insured and must take out a policy for the buildings as well as at least a minimum amount of liability cover and must consider fidelity cover.
Author: Mike Addison, Addsure
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