The early types of insurance policy and the negative implications
Initially sectional title insurance was underwritten on the same basis as the normal buildings combined insurance. This meant that a body corporate had to purchase additional cover in order to comply with prescribed rules, i.e. additional premiums needed to be paid for the addition sections purchased in the policy. This made sectional title insurance rather expensive and bodies corporate invariably omitted certain cover to save on insurance costs. There was no insurance conformity in the sectional title insurance industry as most brokers did not understand the requirements in terms of prescribed rules or sectional title legislation.
The new sectional title insurance contract
Some years ago the opportunity to solve this problem was taken by way of the introduction of a sectional title insurance policy by design. This new contract was based on the basic buildings combined policy but with the addition of more cover extensions at no additional premium. The policy was designed to include all the sections as required by prescribed rules and offered in a single package where the premium is calculated on the total sum insured and not according to the sections chosen. Basic premiums were only increased where additional cover over and above the basic package, was required.
The benefits of the sectional title policy
The new package policy ensured that bodies corporate had a contract of insurance which served the sectional titles insurance industry and gave the trustees peace of mind in that they enjoyed insurance which, by default, largely met the requirements of prescribed rules. An added benefit was that underwriters were able to, (i) offer cover at a very competitive premium rate, (ii) at basic increased cover limits and, (iii) that policy wordings would be relative to the sectional title industry.
Sectional title insurance brokers or advisors
Despite these sectional title policies by design having been around for so many years, many bodies corporate still use the old Buildings Combined basis of insurance. Sadly, this is due to both trustees and brokers not understanding the requirements of prescribed rules. The implication is that much of the cover required in terms of sectional title prescribed rules is ignored and the bodies corporate are not properly insured. Trustees need to ensure that they make use of the services of an insurance adviser who is familiar with the requirements of the Sectional Titles Act and specifically the relative rules pertaining to insurance.
Author: Rian Pienaar
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