Owners corporation insurance is the cover arranged by an owners corporation to protect the building and common property it’s responsible for. For Melbourne Committees, this is a legal requirement under Victorian law, though many owners still call it strata insurance or body corporate insurance.
This guide explains what it usually covers, what lot owners may still need to insure themselves, and what Committees should check each year.
Key Takeaways:
- In Victoria, the owners corporation is generally responsible for arranging insurance for the building and common property.
- Owners corporation insurance usually covers reinstatement, replacement and public liability risks, but it does not replace a lot owner’s own contents, landlord or personal liability cover.
- The sum insured should reflect rebuilding costs, not market value, and the building valuation should be reviewed at least every five years.
- Committees should check the policy, excesses, exclusions, claims history, valuation and broker arrangements before each renewal.
What is strata insurance?
Strata insurance is the common term many owners use for insurance arranged by the owners corporation.
In Victoria, the legal term is owners corporation, although many Melbourne owners still say body corporate or strata. This insurance usually covers parts of the property the owners corporation is responsible for, including common property and certain shared building elements.
It does not automatically cover everything inside an individual lot. Lot owners may still need their own insurance depending on how the lot is used and what is included in the owners corporation policy.
What building insurance usually covers
In Victoria, owners corporations must generally take out reinstatement and replacement insurance for buildings on common property, unless an exemption applies.
This cover is designed to help repair, replace or rebuild insured property to a condition substantially the same as when new.
Building insurance may include:
- the building structure
- common property fixtures and fittings
- shared services
- debris removal
- professional fees, such as architects or engineers, where needed for repair or rebuilding
The exact cover depends on the policy, the plan of subdivision, the building type and any exclusions. Committees should not assume every item is covered just because the policy is described as strata insurance.
How much should the building be insured for?
The insured amount should reflect the cost of reinstating or replacing the insured building, not simply the market value of the property.
In Victoria, an owners corporation must obtain a valuation of buildings it is liable to insure every five years, or earlier if the owners corporation decides to do so.
For Melbourne Committees, this matters because rebuilding costs can change over time. If the sum insured is too low, the owners corporation may face underinsurance risk after a major event.
A practical Committee check is to ask:
- When was the last insurance valuation completed?
- Does the current sum insured match the latest valuation?
- Have recent building works or upgrades changed the insurance needs?
Public liability insurance for common property
Public liability insurance protects the owners corporation if it becomes liable to pay compensation for injury, death, illness or property damage connected with the common property.
In Victoria, owners corporations must generally take out public liability insurance for common property, with a minimum cover limit of $20 million unless another amount is prescribed.
This matters for shared spaces such as entrance lobbies, stairwells, driveways, lifts, gardens, shared car parks, corridors and other common areas.
Lot owners should also consider whether they need their own public liability cover for risks connected to their lot, especially if the property is leased or used in a way that creates additional exposure.
What insurance may lot owners still need?
Owners corporation insurance is not a replacement for personal insurance.
Depending on the lot and how it is used, an owner may need separate cover for contents and personal belongings, landlord insurance, tenant related risks, internal fixtures not covered by the owners corporation policy, improvements or renovations inside the lot, and personal liability connected to the lot.
If there is uncertainty, the safest step is to ask the insurer, broker or a qualified insurance adviser what is and is not covered by the owners corporation policy.
Other insurance the Committee may consider
Some insurance may not be mandatory for every owners corporation but may still be worth considering. The right mix depends on the building’s size, facilities, risk profile and how the owners corporation is managed. Depending on the building, the Committee may ask about:
- Voluntary workers insurance – covers volunteers who assist with owners corporation tasks or duties
- Office bearers liability insurance – protects Committee members against claims arising from their decisions or duties
- Fidelity or misappropriation of funds cover – protects against loss from theft or misuse of owners corporation funds
- Machinery breakdown cover – covers repair or replacement of mechanical equipment, such as lifts or plant
- Cyber or fraud related cover – covers losses from cyber incidents or fraudulent activity affecting the owners corporation
- Cover connected with contractors working on common property – addresses risks or liabilities arising from contractor work on shared property
What should the Committee check each year?
Before renewal, the Committee should ask for a clear summary of the current insurance position. At a minimum, this review should cover:
| Item to review | What to look for |
|---|---|
| Certificate of currency | Confirms the policy is active and current |
| Policy schedule | Sets out what is and isn’t covered |
| Sum insured | Should reflect reinstatement/replacement cost, not market value |
| Latest insurance valuation | Confirms the sum insured is still accurate |
| Excesses | What the owners corporation would need to pay per claim |
| Exclusions | What is not covered under the policy |
| Claims history | Past claims that may affect premiums or cover |
| Premium changes | Any increases or changes from the previous year |
| Commissions or broker arrangements | Disclosed where applicable |
| Recent building changes | Whether the policy reflects any recent changes to the building |
Insurance should not be treated as a simple renewal task. It is part of the Committee’s broader responsibility to protect the building and the owners corporation’s financial position.
When insurance problems may point to poor management
Insurance is one of the areas where poor management can become expensive. A Committee may need to ask more questions if renewal documents arrive late, claims are not followed up, the Committee cannot get clear answers about premiums, the certificate of currency is not provided when requested, the insurance valuation is outdated, exclusions or excesses are not explained, or the manager cannot explain what has changed from the previous policy year.
These issues do not always mean the manager is doing the wrong thing, but they should prompt the Committee to ask for clearer communication and better documentation.
Thinking about changing managers?
Committees rely on their manager for clear, timely answers on insurance.
Change Body Corporate can review how your current manager is handling that, and connect you with one who does it better.
No obligation, no pressure. Just clarity.
If insurance questions are met with slow replies, unclear documents or limited guidance, it may be worth reviewing whether your current manager is the right fit for your Committee.
