Insurance renewals are often treated as a routine administrative exercise, but they play a critical role in ensuring that a sectional title scheme, homeowners association, or property portfolio remains adequately protected. An outdated or incorrectly structured policy can result in underinsurance, rejected claims, or unexpected financial shortfalls for owners and trustees.
Below are some of the key areas trustees, managing agents, and owners should review during the annual renewal process with the support and advice from the Broker.
Replacement Value / Sum Insured
Trustees should ensure that the replacement value or sum insured accurately reflects the current rebuilding cost of the property, including inflation and rising construction costs. If the property is underinsured, insurers may apply “average” at claim stage, resulting in only a portion of the loss being paid.
Although some insurers apply automatic annual escalations, the responsibility ultimately rests with the insured to ensure adequate cover is in place. This obligation is supported by Prescribed Management Rule (PMR) 23(1), which requires the body corporate to insure buildings to replacement value.
Specified and Business All Risk Items
Trustees should review all specified items on the policy, including camera systems, intercoms, gate motors, electric fencing, and solar installations, to ensure the insured values remain adequate. It that may not reflect needs to be communicated to update the policy accrodingly
Correctly specifying these items can assist in avoiding policy limitations like theft without forcible entry, theft of exterior fixtures and fittings, and power surge damage.
Geyser Cover
While the scheme policy generally covers the geyser unit itself, owners are usually responsible for maintenance, repairs, and applicable excesses relating to the hot water installation.
Trustees should ensure adequate cover is in place and that owners disclose non-standard installations such as solar, heat pump, or gas geysers. Geysers typically make up the majority of claims so it is crucial that adequate cover is in place here.
Excesses
Policy excesses should be taken note of for any adjustments, particularly for weather-related risks such as storm, wind, water, hail, and snow damage. Many insurers have increased these excesses due to rising claims trends and climate-related risks.
Trustees should ensure owners understand the financial implications of these excesses. These excesses should be closely monitored and your broker should advise on how to manage them and keep them as low as possible, taking into account the loss ratio of the policy.
Limitations of Cover
Trustees should carefully review policy limitations and sub-limits relating to:
- Trustee’s or Director’s Indemnity
- Public Liability
- Fidelity Guarantee
- Power Surge Cover
- Theft-related cover
Inadequate limits can expose the scheme to significant financial risk. This should be highlighted by the broker to the trustees to ensure adequate cover is in place.
Fidelity Cover
Fidelity cover protects the scheme against theft or misappropriation of funds by trustees, employees, or managing agents.
Trustees should confirm that:
- Fidelity cover is included
- The insured amount remains adequate which is calculated by the managing agent
- All insurer-required documentation is completed
This requirement is supported by PMR 23(6), which requires the body corporate to maintain fidelity insurance.
Replacement Value Surveys (RVS)
Trustees are required to obtain a Replacement Value Survey (RVS) at least every three years to ensure the insured value remains accurate.
An updated valuation helps avoid:
- Underinsurance and average penalties
- Overinsurance and unnecessary premiums
This requirement is contained in PMR 23(2).
Risk Requirements and Cover Restrictions
Trustees should also review any insurer-imposed risk requirements, which may include:
- Electrical Certificates of Compliance (COCs)
- Surge protection measures
- Annual fire compliance inspections
- Maintenance requirements
Failure to comply with these requirements may negatively affect claims or result in cover being restricted. These requirements needs to be carefully navigated with the assistance of your broker,
Final Thoughts
Insurance renewals should never be viewed as merely an annual premium adjustment exercise. They provide trustees and managing agents with an opportunity to reassess risks, ensure legislative compliance, and confirm that the scheme remains adequately protected.
By reviewing insured values, excesses, cover limits, and compliance requirements in line with the STSMA and Prescribed Management Rules, trustees can better protect the financial stability of the scheme and reduce the risk of uninsured exposure.