[Updated: 31 October 2025]
The Sectional Titles Schemes Management Act 8 of 2011 makes it clear that one of the functions of a body corporate is to pay insurance premiums (Section 3(1)(k)). This means that if a body corporate does not have sufficient funds available, it needs to raise them, typically via a special levy.
Trustees are therefore not at liberty to prioritise other payments ahead of the insurance premium or to place the payment of premiums on hold until funds become available.
Understanding the premium
In the case of building cover, the premium represents the cost of insurance, calculated by applying a rate to the sum insured. An annual premium is then determined, which can generally be paid monthly, quarterly, or annually in advance.
Buildings are required to be insured in terms of Section 3(1)(h) of the STSMA. In addition, fidelity cover is prescribed under the Community Schemes Ombud Service Act 9 of 2011, specifically Regulation 15 and Prescribed Management Rule (PMR) 23(7), while public liability cover is set out in PMR 23(8). Collectively, these three components form the compulsory core areas of cover for every scheme.
Recovering the premium from owners
PMR 23(2)(a) empowers trustees to recover additional premiums from owners whose sums insured exceed the values listed on the schedule of replacement values. This often applies where owners have made improvements or requested higher cover to reflect their section’s true replacement value.
In many cases, bond agreements between owners and their financial institutions allow banks to increase the sums insured to align with loan amounts. Addsure assists by providing debit advices so that managing agents or bookkeepers recover these additional premiums correctly from the relevant owners.
Exclusive use areas and additional contributions
Where owners have enhanced their exclusive use areas, for example, by installing a swimming pool, paving, or decking, an additional premium often applies. As exclusive use areas form part of the common property, the benefitting owners carry the financial responsibility for the additional insurance. These contributions can be recovered through monthly exclusive use levies or direct recoveries.
The importance of premium payments
Timely payment of premiums is critical. Failure to maintain cover can leave a scheme financially exposed and non-compliant with the governing legislation. Ensuring that insurance premiums are properly managed and settled is therefore one of the most important aspects of responsible scheme administration.
Author: Mike Addison
Addsure is a leading sectional title insurance broker. Get fit and proper advice from advisors who understand sectional title.