Strata Insurance

In New South Wales, an Owners Corporation has a statutory obligation under the Strata Schemes Management Act 2015 (NSW) to insure the strata scheme to protect the building, common property, lot owners, committee members, and the Owners Corporation itself against significant financial risk.

Strata insurance is not limited to a single policy but is typically made up of several interrelated covers, some mandatory and others strongly recommended based on risk..

1. Building (Damage) Insurance

The Owners Corporation must insure the building and common property under a damage policy for full replacement value, meaning the cost to rebuild or repair the building to a condition not worse or less extensive than when it was new.

This insurance generally covers loss or damage caused by:

• Fire and explosion
• Storm, hail, lightning, and impact
• Water damage, including burst pipes
• Vandalism and malicious damage
• Accidental damage to building structures and common property

Cover applies to the building structure and common property, including walls, roofs, floors, foyers, lifts, stairwells, car parks, and shared services.

Regular professional insurance valuations are recommended to ensure the sum insured reflects current rebuilding costs and avoids underinsurance.

2. Catastrophe Cover

Catastrophe cover forms part of modern strata building insurance and provides protection against escalation in rebuilding costs following a major disaster, such as:

• Severe storms or bushfires
• Flood events
• Earthquakes or large-scale natural disasters

This cover recognises that, after a catastrophe, rebuilding costs can significantly increase due to labour shortages, material price increases, access constraints, and regulatory requirements. Catastrophe cover helps bridge the gap between the original insured amount and the actual cost to rebuild following such events.

3. Flood Cover

Flood cover is now commonly included within strata insurance policies but should be specifically confirmed at each renewal, particularly for schemes located in flood-prone or low-lying areas.

Flood insurance typically covers damage caused by the inundation of normally dry land by water from rivers, stormwater systems, or other natural sources. Given the increasing frequency of extreme weather events in NSW, ensuring adequate flood cover is critical to the financial protection of the scheme.

4. Public Liability Insurance

Public liability insurance protects the Owners Corporation against legal liability if a person is injured or property is damaged due to negligence relating to common property.

Typical examples include:

• Slips, trips, and falls in common areas
• Injury to visitors, residents, or contractors
• Damage caused by falling building elements or defective common property

NSW legislation requires a minimum cover of $10 million for any one event, although higher limits are often adopted depending on the size and use of the scheme.

5. Office Bearers’ Liability Insurance

Office bearers’ liability insurance protects strata committee members and office bearers (Chairperson, Secretary, Treasurer, and committee members) against personal legal liability arising from acts, errors, or omissions made in good faith while carrying out their duties.

This cover can respond to claims involving:

• Alleged mismanagement or failure to act
• Breach of duty or negligence claims
• Legal defence costs, settlements, and damages

While not mandatory, this insurance is widely regarded as essential given the increasing complexity of strata governance and decision-making.

6. Owners’ Fixtures and Fittings Cover

Strata insurance typically includes cover for owners’ fixtures and fittings, being items within a lot that were part of the original building or installed by a previous owner and form part of the structure.

This may include:

• Built-in cupboards and joinery
• Bathroom fittings and sanitary ware
• Fixed floor tiles and original flooring
• Internal walls, doors, and windows

This cover does not extend to removable contents or personal belongings, which remain the responsibility of individual lot owners to insure separately.

7. Workers Compensation Insurance

If the Owners Corporation directly employs workers (such as cleaners, caretakers, or building managers), it must hold workers compensation insurance in accordance with NSW legislation.

Where contractors are engaged, the Owners Corporation should ensure those contractors maintain their own appropriate insurance.

8. Voluntary Workers and Fidelity Guarantee Insurance

Most strata policies also include or offer:

• Voluntary workers insurance, covering unpaid committee members or volunteers injured while performing authorised duties
• Fidelity guarantee insurance, protecting the Owners Corporation against loss of funds due to fraud or dishonesty by persons handling money

These covers provide additional protection and risk management for the scheme.

Important Note for Lot Owners

Strata insurance does NOT cover:

• Personal contents or furniture
• Appliances, curtains, or loose floor coverings
• Landlord risks such as loss of rent

Lot owners should maintain their own contents and/or landlord insurance to ensure full protection.