The insurance a Body Corporate must have is affected by the type of survey plan the scheme is registered under.
The two common types of survey plan are:
- Building Format Plan
- Standard Format Plan
A body corporate must have insurance for their full replacement value for:
- common property
- body corporate assets
- public risk
- every building that contains a lot.
The Body Corporate and Community Management Act makes it compulsory for Bodies Corporate to obtain professional insurance valuations at least every 5 years to make sure that the common property areas are properly covered. The Valuation Report must be kept on the Body Corporate records.
The body corporate must take out public risk insurance over the common property and for assets where it is practical to have public risk insurance. The minimum cover is $10 million. We recommend that committees insure their reasonable activities through office holder indemnity insurance
The type of survey plan (normally a building format plan or a standard format plan defined earlier in this handbook) affects the body corporate’s responsibility to insure a building.
In the most common type, the building format plan, the body corporate insures the whole building and common property areas and assets. The building insurance policy must cover damage and the costs associated with the reinstatement or replacement of insured buildings (including the cost of taking away debris and the fees of architects and other professional advisers) and provide for the reinstatement of property to its condition when new.
If the complex is under standard format plan, the body corporate has the obligation to insure common property and the body corporate’s assets (to full reinstatement value) and to ensure that buildings that have common walls with lot owners are insured (to full reinstatement value). The body corporate may set up a voluntary scheme to insure the buildings where there are no common walls between lots. Owners of a lot with a stand alone building are not obliged to take part in such a voluntary insurance scheme. They do have to pay their share of other body corporate insurance (eg insurance for common property and body corporate assets).
The basis for calculating the insurance premiums for common property and for body corporate assets (and for building reinstatement insurance in Building Format plan complexes) is the interest schedule lot entitlements, not the contribution schedule used to calculate most body corporate expenses. Under the standard format plan where there are lots with common walls, the body corporate must arrange the insurance for the buildings and charge the lot owners their proportion of the costs of the insurance for reinstating their lot.
Special rules apply allowing the body corporate to charge owners extra insurance if they have made improvements to their lot that have affected the premium paid by the body corporate, or if they conduct activities on the lot that affect the premium paid. An owner who make substantial improvements to their Lot MUST advise the Body Corporate Manager or the Insurer of the costs and details of the renovation otherwise in the event that the lot (unit) or the building was destroyed the owner would not receive the additional insurance payout for those renovations.
Where there is an excess on a policy and the event covered by the insurance claim affects one lot, the lot owner is usually liable to pay the excess amount, unless the body corporate decides that it is unreasonable in the circumstance for the owner to bear that liability.
At each annual general meeting, the body corporate must disclose information about each policy of insurance to lot owners in the notice of each annual general meeting. These details must include
- The name of the insurer
- A summary of the type of cover under the policy
- The amount of the premium
- The date that the cover expires.
At each annual general meeting, the lot owners must consider a motion to review each insurance policy held by the body corporate.
In the latest changes to the regulations, every five years the body corporate has to employ a consultant to provide an insurance valuation.
For more information see the “Insurance” handout available from the Commissioner’s Office phone 1800 060 119 or through www.justice.qld.gov.au/bccm