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Why you need Fidelity cover

Fidelity cover is the most overlooked sectional title insurance cover, yet body corporate owners are at a very high risk. It is the responsibility of the trustees to ensure that the body corporate agrees on an amount of fidelity cover appropriate for the needs of the body corporate at a meeting of owners (general meeting).

Fidelity Insurance (or Fidelity Guarantee) is cover purchased against the loss of money, or property stolen by an employee of the body corporate. Thus, if you have a standard buildings policy, you may automatically have R20,000 or R50,000 cover – this covers the body corporate when a trustee or employee steals money or property that belongs to the insured.

Note: Under normal circumstances, the managing agent would NOT be considered an employee. However, according to prescribed rules (specifically 29.2(b)) the body corporate is required to purchase cover against dishonest acts of the managing agent.

Notwithstanding the managing agent’s Fidelity Fund Certificate, the owners need to consider the amount of cover as the rules do not refer to the Estate Agents Fidelity cover at all; it refers to cover to be purchased by the body corporate itself.

Bear in mind that if the funds managed or controlled by the managing agent are not held in trust, the Estate Agents Affairs Board (EAAB) does not cover the funds (see EAAB website for more detail). The EAAB Fidelity fund will cover losses where managing agents are not registered as long as the money was held in trust.

It is harder to determine who controls the money when the managing agent and the trustees jointly signed.

What if a trustee and a managing agent collude and run off with the money? We suggest that you cover all bases; the managing agent needs to take additional Fidelity Guarantee cover through their own commercial policies. We also recommend Professional Indemnity cover for managing agents although this is not stipulated as a requirement. This protects the body corporate clients. If it is found that an accounting error causes a client a financial loss rather than dishonesty, a professional indemnity policy (rather than Fidelity cover) will be needed.

The dynamics of the body corporate, the relationship and experience of the managing agent, the managing agent’s internal systems, checks and balances should all be considered.


Contact Addsure – the leaders in Sectional Title Insurance – to get advice on the most comprehensive insurance cover for your peace of mind. Contact Addsure head office on 021 551-5069.