Sectional title insurance – the building might be covered, but not your goods

MANY sectional title unit owners mistakenly think their body corporate’s insurance policies cover movables such as furniture and curtains as well as the buildings, common property and all fixtures in the sections.

This is not the case, says Martin Bester, managing director of Intersect Sectional Title Services.

“Prescribed Management Rule 29(1)(a) places a duty on the trustees to ensure that the buildings and all improvements to the common property are insured, but the onus is on individual residents to insure their moveable items,” he says.

He says bodies corporate insurance policies cover the buildings, all fixtures and fittings and liability and indem- nity insurance against perils specified in the Sectional Titles Act, as well as other perils the members may decide are required.

“Perils such as lightning, storm, flood, fire, earthquake, bursting geysers or hot water apparatus and resultant loss of rent are covered.

“Excess payments are predetermined and negotiated with the body corporate insurance brokers or insurers.

Different excesses apply to different perils and the more a particular peril is claimed for the higher the premium and excess are likely to be at renewal. Excesses for claims relating to common property are payable by bodies corporate. However excesses payable in terms of sections are pay- able by the owner of the section suffering the loss.”

Prescribed Management Rule 29(4) says owners of sections are responsible for any excess payments in respect of their sections, payable in terms of a contract of insurance entered into by the body corporate: provided owners may, by special resolution, determine that the body corporate is res- ponsible for excess payments in respect of specified damage.

Bester says some bodies corporate have amended their rules to deal with the application of excesses. But because so many cases are not cut and dried, application of the rule that each owner is liable for an excess if he suffers a loss seems to remove ambiguity and arguments from the equation.

Bester says owners can insure their units for more than the sum bodies corporate provide.

“The members approve the insurance replacement values at each AGM. However the body corporate only insures at an agreed rate, so if the owner feels the sum insured for his section is too low, usually as a result of internal improve- ments, he may increase the sum insured via the body corporate’s policy. The owner will be liable for the difference in the premium as a result.

“Although the onus is on the trustees to ensure that buildings are insured to their full replacement value, the value needs to be determined, and for this, professional valuations are recommended,” he added.