With sectional title insurance, the guiding legislation – Sectional Title Schemes Management Act and Community Scheme Ombud Services Act – determines what kind of insurance bodies corporate require. In this blog, we will discuss the community scheme insurance requirements from an owner’s perspective.
As an owner, tenant or resident, it is important to understand what insurance should be arranged to ensure adequate cover. The simplest way to look at this is to separate buildings from contents.
The body corporate arranges the buildings cover and the resident arranges their own contents cover.
The trustees – on behalf of the body corporate – arrange the buildings cover and should advise the owners annually, ahead of and at the Annual General Meeting, of their sums insured via the Schedule of Replacement Values (SRV). This protects the owner against insured losses occurring in respect of the buildings, e.g. damage caused to the buildings by fire, storm, flooding, burst pipes, break in, earthquake, etc.
The contents – losses or damages caused to the moveable assets such as loose carpets, furniture, clothing, personal items, laptops, etc. – need be insured by each owner in their individual capacity. In the case of a tenant, the tenant arranges this themselves.
Often, as a result of misunderstanding, the tenant and owners will both arrange for contents and buildings cover in error causing a degree of dual insurance. In a previous blog, we unpack dealing with dual insurance.
Liability cover is also arranged by the body corporate but only pertaining to losses occurring in respect of common property improvements. Therefore, any liability in respect of losses occurring within a section would remain the resident’s responsibility. The contents cover policy should take care of this.
Fidelity cover is the one area where an individual owner does not need to concern themselves other than to check at the Annual General Meeting that the body corporate has arranged this and what the minimum required amounts are.
New legislation has failed to include loss of rental and alternative accommodation for owners as previously required. Assuming this was a simple oversight on the part of the lawmakers, we assume that insurers will continue to provide this cover.
However, at claim stage there is often a misconception: The body corporate’s policy is designed to protect the owners where there is material loss and it is claimable. The insurer will cover reasonable alternative accommodation for owner occupiers until reinstated within reason. Where tenants cannot occupy, a reasonable proven loss of rental income is covered. This is to cover loss to the owner and not the tenant provided that such rental income is confirmed as domestic letting and not business income loss such as B&B letting.
In short, owners are usually covered in terms of losses where alternative accommodation is required or where loss of rental is experienced through a claimable event. Tenants or other occupiers need to ensure that alternative accommodation and related losses are covered under their own domestic contents policy.
In office complexes and commercial sections, it is somewhat more complicated, especially in mixed-use schemes. Professional input from experienced insurance advisors will be required.
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Cover arranged |
Arranged by |
|
|
Body corporate |
Occupier tenant |
|
|
Buildings |
X |
|
|
Contents |
X |
|
|
Liability |
X |
X |
|
Fidelity |
X |
|
|
Loss of rental |
X |
|
|
Alternative accommodation |
X |
X |
Under certain circumstances, owners may wish to insure aspects of buildings cover but advice from an advisor well-versed in sectional title matters is recommended.
Author: Mike Addison, Addsure
Contact Addsure – The Leaders in Sectional Title Insurance – for fit and proper advice from advisors who understand Sectional Title. Contact us in Johannesburg (011) 704-3858; Durban (031) 459-1795; Cape Town (021) 551-5069