The Sectional Titles Schemes Management Act, the regulations and the prescribed management rules set out what needs to be covered. The trustees, together with a suitably experienced and qualified insurance advisor need to ensure that the selected insurance product meet both the legislative or regulatory requirements as well as the needs of the community scheme.
The rules and regulations impact on the insurance. In the table below we compare present policies against the rules and regulations. Please note that this is an example and may not apply to your specific scheme:
|
Act / Regulation / Rule Requirement |
Typical Building Policy |
Note |
|
Fire, lightning, explosion and smoke |
Fire, lightning, explosion |
Smoke damage being met by some insurers |
|
Riot, civil commotion, strikes, lock-outs, labour disturbances |
Covered under Sasria coupon |
|
|
Storm, tempest, windstorm, hail and flood |
Storm, wind, water, hail or snow |
Retaining walls not covered or only conditionally covered. Excludes wear and tear or gradual deterioration. Excludes cover where process includes the application of water. |
|
Earthquake and subsidence |
Earthquake covered Subsidence often excluded |
Earthquake could be limited. Subsidence compulsory but either not covered or very limited in cover and/or expensive. |
|
Water escape including bursting or overflowing of water tanks, apparatus or pipes |
Bursting or overflowing of water tanks, apparatus or pipes |
Water escape could be problematic. Excludes wear and tear or gradual deterioration. |
|
Impact by aircraft and vehicles |
Covered more widely |
|
|
Housebreaking or any such attempt |
Damage to the buildings caused by break in is covered |
The new rules and regulations will need to be tweaked; we expect amendments in due course.
Noticeable omissions include “loss of occupation or loss of rent” in respect of insured events and the preamble in previous PMR 29.(1)(a) which included “subject to negotiation of such excess, premiums and insurance rates as in the opinion of trustees are most beneficial to the owners”
We also feel that “subsidence” should have been excluded from being compulsory and that “accidental damage” should have been brought in.
It is thus recommended that these omissions be borne in mind and still considered. Where subsidence is not covered, owners must be made aware and the insurance brokers advice in this regard properly noted.
We have always used the analogy of a dolls house: shake it out, turn it upside down and whatever stays intact, should be covered. Simplified: the buildings cover is intended to cover the owners against sudden and unforeseen damage to the buildings (not contents) and improvements to the common property caused by an insured peril (as stated above). As long as the damage is not caused by wear and tear nor is of a gradual nature. There are conditions and exclusions but owners can take comfort in knowing that presently, South African insurers offer community schemes very wide building (material damages) cover – much more than 20 years ago.
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