What does the Body Corporate Insurance cover?

The Sectional Title Act requires the Body Corporate to insure the buildings to the value of their full replacement cost. The insurance covers all the sections and all improvements to the common property. The premiums for the Body Corporate’s insurance form part of the monthly levies, it should however be noted that the Body Corporate insurance only covers damage and destruction of the buildings. It does not cover the contents of your section. You must make sure that your furniture, fittings and personal belongings are separately and adequately insured by means of a suitable policy.

If you feel that your section is worth more than the amount for which it is insured, you are at liberty to increase the amount for which your section is insured, for which you will have to pay the extra premium. This would include improvements to any individual unit, if the owner has done improvements and these have subsequently increased the value of the unit, these improvements must be added to the insurance schedule with the value and again this additional insurance will be for the owners own account.

Under the sectional title insurance policy a body corporate is only expected to pay the excess for a claim lodged which is directly related to the common property area. Should the body corporate lodge a claim on behalf of a specific unit, the unit owner is liable for the excess payments.

Procuring adequate insurance is one of the first tasks expected of the trustees after establishment of the Body Corporate. Body Corporate insurance policies must be revised annually. Ahead of each Annual General Meeting (AGM), trustees must prepare the following insurance schedules:

• A schedule reflecting the aggregate replacement value of all buildings and improvements.

• A schedule assigning the aggregate replacement value to individual units according to participation quotas.

The insurance policy must subsequently be modified according to the approved schedules. You will find any increases in the insurance premiums are clearly stipulated in the insurance schedules that accompany the notice of the AGM. With the increase in property values, it is inevitable that your rates and taxes will also increase. It is up to the members of the Body Corporate attending the AGM to approve any proposed levy increases.

Trustees and owners should check the following to avoid claims from being rejected:

  • Functional and adequate fire fighting equipment should be in place
  • The scheme should not be under insured Equipment and building materials should be SABS approved e.g. geysers
  • Sectional title insurance policies have not lapsed.

Article By: Andrew Schaefer - www.paddocks.co.za