Differentiating between personal and communal insurance

Purchasing property within a complex or block of flats promises a host of advantages – security, close neighbours and a body corporate – but it remains the owner’s responsibility to differentiate between personal and communal insurance, according to a media release from Trafalgar Property Management.

Legally, the body corporate must insure the buildings to their replacement value including the common property and improvements. The premiums form part of the monthly levies, but responsibility for insuring personal contents belongs to the owner.

Since every owner legally belongs to the body corporate, the Sectional Title Act allows anyone who believes their investment is worth more than insured value to raise their contribution and thus their cover.
Andrew Schaefer, MD of Trafalgar Property Management, says this would protect improvements owners have invested into their homes that consequently increase the property value.

In terms of sectional title insurance, the body corporate only pays the excess for claims lodged that relate to the common property – the areas of the complex or flats that belong to everyone communally. This means should claims be lodged on behalf of individual owners, they are liable for any excess.

Schaefer says procuring adequate insurance is among the trustees’ first tasks on forming the body corporate and the policies must be revised annually, specifically assessing the building value and improvements.

“Given the increase in property values following the recent national evaluation initiative, rates and taxes have risen and the body corporate annual general meeting must address levy changes arising from rates now being paid directly by owners as well as changes to other body corporate budgetary items,” he says.

However, there are few things more devastating than having an insurance claim repudiated because the trustees did not check the fine print. Simple guidelines include installing functional and adequate fire-fighting equipment; ensuring the scheme is not under-insured; demanding owners install building materials and equipment like geysers that carry South African Bureau of Standards accreditation and ensuring the insurance policy has not lapsed due to unpaid premiums.
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