Understanding sectional title insurance is becoming more important than ever before. These are the things you should know to ensure you’re always covered
Buying a unit in a sectional title scheme has become a very popular route to home ownership for many South Africans. Community schemes offer residents a number of shared benefits such as increased safety and security, use of communal facilities such as pools and playgrounds, as well as lower maintenance- and insurance costs. When buying into this communal form of property, you as the unit owner become part of what is known as the ‘body corporate’ of the sectional title scheme. Due to the complexity in joint ownership of buildings, specific legislation has been passed to provide unit owners with the necessary guidelines and rules on how to manage and regulate the running of their body corporate. This legislation covers all pertinent activities of the body corporate including the setting up of the scheme,the appointment of trustees, the upkeep and maintenance of the scheme, as well as the insurance cover that needs to be in place.
The trustees of a body corporate are responsible for arranging insurance that meets all of the requirements set out in legislation. All the buildings of the body corporate (including the individual units and the common property such as walls, driveways, clubhouses) will be insured together under one insurance policy in the name of the body corporate. It’s one of their most important functions and if not done correctly, could result in an unmitigated financial disaster for all unit owners.
The buildings of the body corporate (including the individual units and communal property) need to be covered against risks that cause property damage such as a fire, lightning, a storm, earthquake, subsidence, impact and theft. If you are unsure of what constitutes a ‘building’, imagine holding your unit in your hands, turning it upside down and shaking it – everything that remains installed is generally considered part of the building, while the rest is not. An exclusion to this are temporarily mounted items such as a television on the wall. This means that your unit, including its permanent fixtures and fittings, will be covered by the body corporate insurance policy, and you don’t need to arrange separate cover. However, your home contents as well as your vehicles are not insured by the body corporate policy. The body corporate will also need public liability insurance to cover it against claims and legal costs for bodily injury, death, and property damage emanating from use of the common property: for example, a visitor falling down the stairs, or having the gate close on their vehicle.
The premium for the body corporate insurance policy is paid by the scheme and split according to the relative size of each unit. It’s then collected from unit owners via the monthly levies. The split is done on a Participation Quota (PQ) schedule that accompanies the insurance schedule. It is important that any extensions or additions to a unit have been communicated to the body corporate’s insurers and are correctly reflected on the PQ schedule.
Claims & Responsibilities
For claims purposes, each unit owner in a body corporate is seen as an individual policyholder and is able to submit a claim under the policy. To ensure efficient handling , it is important that claims are submitted through the correct channels as determined by the body corporate. This can be either through the trustees, broker, managing agent or insurer. As a unit owner, you are responsible for paying the insurance excess for damage to any part of your unit that you are obliged to repair and maintain – notably the inside of your unit. Individual unit owners are also responsible for the insurance excess on any geyser system serving their unit, regardless of where the geyser is situated. If the damage occurs on the common property or the exterior of your unit, the excess will be payable by the body corporate.
Who To Trust
Given the risks and potential complexity involved, it’s highly advisable for trustees to make use of a trusted independent insurance broker when arranging insurance cover for the body corporate, as opposed to trying to ‘wing it’ with a call centre. It’s also recommended that insurance is placed with a specialist insurance provider whose policies are specifically designed to cater for the various intricacies of community living and its overarching legislative requirements. While some general insurers do offer cover, it’s often not fit for purpose – resulting in unmet expectations at the claims stage.
Words by Kayla Wessels