Insurance and duet sectional title schemes

[Updated: 01 July 2025]

Can we, as owners in a body corporate duet, arrange individual policies for our respective units and forego insuring as a body corporate under one policy?

The short answer is “No.”

Statutory duty

While it might be technically possible under certain circumstances, it becomes highly complex and risky at claims stage; it is also contrary to legislation. It is a statutory duty for the scheme to arrange cover in terms of the functions of the body corporate, as set out in Section 3.(1)(h) of the Sectional Titles Schemes Management Act 8 of 2011.

Owners who attempt to insure separately often don’t realise they each own, in proportion to their participation quota, respective shares in the roof, grounds, boundary walls, and exterior walls of all the buildings.

Not only does the scheme (however small it may seem) need to insure the buildings, but the body corporate must also insure against public liability and fidelity risks.

Jigzaw puzzle analogy

I use two analogies when discussing duets or situations where owners wish to insure separately: a) the two units are bound together like pieces of a two-piece jigsaw puzzle – one cannot exist without the other, and b) trying to separate the risks is like trying to unscramble an egg.

Consider the following scenarios involving two buildings: one of 200 sqm and another of 100 sqm, each under its own roof. That means a total of 300 sqm and likely participation quotas of 66% and 34% respectively. Now, imagine the smaller section owner has installed a pool in their garden area. With that in mind, consider these scenarios:

• A fire breaks out on the roof of the larger building. The owner has insured this building alone. A loss adjuster finds that most damage is in the roof area (common property), but the buildings are only insured for 66% of their value, leaving a 34% shortfall. Both owners own all common property in undivided shares.
• A pipe bursts on the outside of one building. It is a common area pipe. Who pays when the insurance does not? A new owner may be well within their rights to refuse to carry common area costs not properly agreed upon and not documented in the rules.
• The swimming pool installed by the smaller section owner is severely damaged in an impact event. The loss adjuster finds the pool is on common property but only included under a policy covering 34% of the buildings’ value.
• A child drowns in the pool, and the parents sue the body corporate. Will the larger section owner be happy to carry 66% of the liability? Without proper cover noting their rights and interests, that owner may be uninsured for their share of the liability.
• A prospective buyer submits an offer to purchase, and the bank grants a bond subject to confirmation of the body corporate’s insurance. The owners cannot agree on insurance, and the sale collapses. Who is liable for damages?
• A boundary wall fails on one side of the property after a storm. The insurer rejects the claim due to an exclusion (the wall acted as a retaining wall). The owner who benefits from the wall claims 64% of the loss from the other owner.

Insurance for sections

Section 14 of the STSMA does allow owners to insure their sections, notwithstanding the body corporate’s policy. The emphasis is on sections. This dual cover is intended for risks not covered by the scheme’s policy. Remember: a unit is a section PLUS an undivided share in common property. Thus, it is generally not feasible to insure buildings separately where common property is shared.

Rules may be created assigning responsibility to each owner to maintain the building they enjoy, but these should be checked carefully, particularly regarding how they affect insurance premiums. Owners need to agree on how premiums and excesses 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 common property elements.

Two owners, two trustees

Finally, remember both owners will usually serve as trustees and share responsibility for ensuring the scheme has adequate building, liability, and fidelity cover. Where one owner installs a swimming pool, children’s play equipment, trampoline, etc. in a common property area – even exclusive use – both owners remain, by default, responsible for the maintenance and risks.