Sectional Title insurance can be a little confusing and, as a new owner, you may be tempted to just assume your body corporate has you covered. While this may be the case, understanding the extent of your coverage and your personal liability is the only guaranteed way to protect yourself against potentially costly oversights.
Who pays for the insurance?
Sectional Title insurance is a legal requirement for all developments, which makes it a non-negotiable expense. The costs are typically shared by all section owners and are factored into the monthly levies. They are then paid out of these pooled funds by the Body Corporate.
While the cost of this insurance of this insurance is shared, it’s not necessarily shared equally, and contributions are usually based on the participation quota (PQ) applicable to each sectional title unit.
Exceptions to this rule can be made if a unit’s replacement value has increased, and the owner – or their bank – wants to ensure they are adequately covered. The additional cost would then be paid by that unit’s owner above and beyond their normal participation quota.
What does the insurance policy cover?
To make sure that you know what is covered by the policy, each owner is encouraged to obtain a copy of the Body Corporate insurance policy.
These policies generally cover the Body Corporate – that is, the owners as a collective – for the full replacement value of all or any of the residential sections in the complex and any common property that is destroyed or damaged as a result of fire, flood, earthquake, riots, burst pipes and vehicle collisions.
What is not covered by the insurance policy?
The purpose of Body Corporate insurance is to protect against loss due to a sudden and unforeseen event, not due to ordinary wear and tear or damages that occur over a period due to poor design or poor construction.
Body Corporate insurance typically does not cover the contents of homes or any of their personal belongings – even if these are lost or damaged due to one of the ‘insured events’ covered by the Body Corporate insurance. Owners and tenants need to take out their own, individual insurance policies to cover such items.
Who pays for the excess in the event of a claim being lodged?
Recent amendments to the Sectional Titles Act – more specifically the insertion of Prescribed Management Rule 29(4) – stipulates that the section owner who lodges a claim is the one responsible for the excess payment relating to that claim. The only way around this is for the Body Corporate to pass a special resolution to the contrary.
Therefor it’s important that the trustees ensure that everyone understands who will be responsible for paying any excesses in the event of a claim being made on the Body Corporate insurance.
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More about Fitzanne Estates
Fitzanne Estates (Pty) Ltd is a Property Management Company who can sufficiently administer your property investment to the benefit of the Landlord, the Body Corporate and the NPC – Non Profit Company. Services include Letting, Sectional Title Management, Full Title Management (NPC – Non Profit Company) and Sales.
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