Apartment or house? What strata does (and doesn’t) cover for landlords

If you own a property in a strata-titled building, understanding what your strata insurance does and doesn’t cover is essential. And yet, many landlords mistakenly believe that residential strata insurance covers everything – and that if all else fails, a tenant’s bond will plug the gaps.

Put simply, strata insurance is designed to cover the building’s structure and common areas. It may also cover certain shared property (such as appliances, equipment and furniture in communal spaces, depending on the policy and the scheme.

Across Australia, strata legislation and scheme by-laws generally require the owners corporation (also known as the body corporate) of a strata property to hold building insurance for common property. For landlords, it plays an important role in protecting shared property assets – including those that may not be top of mind, such as damage to foyers, stairwells, gardens and some shared security systems.

Depending on the policy, strata insurance may also respond to certain events that may impact the building structure (for example, storm-related damage) and may include liability cover for incidents on common property, as well as cover for some legal costs.

While the safety net that is strata insurance offers considerable peace of mind, it doesn’t cover everything. For landlords, understanding potential gaps can help reduce the financial impact of an unexpected event.

What’s covered?

Most properties on a strata title will be covered by a strata insurance policy arranged by the owners’ corporation.

Depending on the structure of the scheme, this can include apartment complexes, a small group of units, duplexes, low-rise boutique apartments and certain retirement villages.

Strata insurance can extend to common property items such as property fences, driveways, and some standalone structures on common property (for example, a shared garage), but what’s included depends on the policy.

The joint owners or body corporate of a building are responsible for arranging strata building insurance, with the cost typically shared by owners through strata levies. The intention is to spread risk across the scheme rather than leaving individual owners to fund major building-related losses on their own.

What’s not covered?

As a landlord, items inside your lot (your individual apartment or unit), such as curtains, carpet, floorboards, kitchen or bathroom counters or light fittings, may not be covered by the strata building insurance policy. The same goes for public liability – strata insurance focuses on incidents on common property, rather than on the risk that a visitor or tradesperson injures themselves while inside your unit, exposing you personally to the risk of a lawsuit. It also doesn’t cover you for loss of rent if your property becomes inaccessible or uninhabitable.

This is where landlord insurance comes into play: a separate policy, tailored to the risks of your property investment.

Understanding how strata insurance differs from landlord insurance can help you decide what cover you may need. Being underinsured can leave property owners significantly out of pocket for repairs or rebuilding after an insured event.

The problem of maintaining adequate insurance cover on your investment property amid a cost-of-living crisis is critical, but many fall short. A Terri Scheer survey in January found the most common policy held by landlord investors is non-specialist home insurance (59 per cent), followed by landlord insurance (54 per cent).

Finding a policy

When deciding which provider to go with, it can be useful to look for a specialist in the landlord insurance space able to offer options that cover the specific needs of your investment property.

For example, landlord insurance specialist Terri Scheer offers policies designed to address risks associated with owning a rental property. Established in 1995, the company is Australia’s leading landlord insurance specialist with decades of experience.

And as far as strata insurance goes, it’s important to be familiar with your policy – and its limits. Premiums are typically calculated based on factors such as building size and condition, previous claims history, age of the property, value of the insured building and whether you’ve signed up for any optional extras.

Terri Scheer is Australia’s leading landlord insurance specialist. For more information, visit www.terrisheer.com.au.

This article is general information only and does not take into account your objectives, financial situation or needs. Consider whether it is appropriate for you and seek independent advice before making any decisions.

Insurance is issued by AAI Limited ABN 48 005 297 807, trading as Terri Scheer. Before buying insurance, read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) available at www.terrisheer.com.au.