Insuring your sectional title property – what you need to know

Insuring your sectional title property can be a minefield for consumers regarding who is responsible for which portion of the property. As an owner, you have to know what to insure yourself and which sections you can depend on the body corporate to insure.

Insurance against fire is one of these thorny issues. Although fire is not top of mind for South Africans when they buy insurance because the chances of becoming a victim are relatively low and fires are not as common as burst geysers, burglaries, or electronics getting fried by power surges, the losses can be devastating.

In addition, the risks are also increasing due to factors such as load shedding and alternative power installations, as well as hotter and drier weather in some parts of the country. We have seen the havoc runaway fires caused in the northern hemisphere over the past few months in places where fires are not always a problem.

Unfortunately, it is often only after they experience a fire-related loss that homeowners discover that their insurance does not offer them as much cover as they hoped for and this is especially true for owners of sectional title properties, says Sumarie Greybe, co-founder of Naked Insurance.

“As a homeowner, you will generally want to ensure that you are covered by two types of insurance: buildings insurance and home contents insurance. Anything that is a permanent fixture in your home is generally insured under building insurance, including the flooring and carpets, fixtures, plumbing, light fittings, geyser and anything else you cannot pick up and take with you when you move out.”

Greybe says your moveable belongings, such as your furniture, clothes, most appliances (if they are not integrated into the home), and television are covered under your home contents insurance. Since a fire could devastate both the structure of your home as well as destroy or damage some or all of your belongings, both kinds of insurance are essential.

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What must buildings insurance cover?

“If you live in a complex or a block of flats, your body corporate or homeowners’ association will usually buy a buildings insurance policy on behalf of all of the property owners. If the structure or fittings in your flat or townhouse are damaged or destroyed in a fire, you will have to claim for repairs and restoration of your property through this policy,” Greybe says.

A good buildings policy should include temporary alternative accommodation if your home is uninhabitable after a fire. If your apartment is unsafe and unsuitable to live in after a fire, you should be able to claim a benefit that will enable you to pay for another place to live while your home is being fixed.

This benefit should also cover you if you cannot access your home due to damage or construction work at a neighbouring unit that experienced a fire. The policy should offer cover for everyone in the building or complex who cannot access or live in their homes after a fire.

But what if the policy lets you down and you are unhappy with the payout or if your claim was rejected?

Greybe says provided you are satisfied that your body corporate lived up to its responsibility to buy appropriate insurance, you can work with the trustees to escalate a complaint with the insurance company.

“If you do not get any satisfaction, you can lodge a complaint with the ombudsman for short term insurance. If your body corporate’s policy does not fully cover the damage to your home or provide a satisfactory temporary alternative benefit, you can insist that the body corporate compensates you.”

If a fire at a neighbouring building prevents you from accessing your home, Greybe says you or your complex can insist that the neighbouring building’s body corporate compensates you for your damages.

That body corporate will claim from its liability insurer, which will pay you if your claim is successful. In the same way, your building’s liability policy should cover you if a fire in your complex prevents residents in neighbouring buildings from accessing their property.

Greybe warns that fire is not the only risk you face. “Storms can tear off the roofing, while lightning, burst geysers and plenty of other incidents can cause damage to your unit. Therefore, you should feel free to ask the managing agent or trustees about which buildings and liability insurance they have bought.”

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What to look out for in the buildings insurance

Check if there are limits on cover amounts, which risks are covered and whether owners have to pay a share of the excess if they have to claim. As an owner, you can also become a trustee on the body corporate and play a role in managing the building and the insurance cover.

People who live in complexes or blocks of flats must also remember that they are themselves responsible for insuring the contents of their homes. All the movable items you brought with you when you moved into your home are your responsibility. If these items are damaged or destroyed in a fire, you will generally need to claim from your contents policy.

However, the picture changes if you rent instead of own your home in a complex or apartment. If you rent, the buildings insurance is your landlord’s responsibility. It is up to the landlord to ensure that the property is safe and suitable to live in.

This responsibility includes repairs and maintenance of the building and its features. Transparency is also important in this case and you can ask about the insurance in place and the body corporate’s track record in tackling issues, such as leaking ceilings or plumbing issues.

Greybe says in theory, you will have a case to cancel the lease if the home becomes uninhabitable after a fire. “To be on the safe side, you can ask your landlord to insert a clause in the lease agreement that provides for a temporary accommodation benefit if the home becomes uninhabitable after a fire or for the contract to be cancelled.

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Maintenance a thorny issue

Maintenance is also a thorny issue for sectional title schemes. Ask any sectional title body corporate what keeps them awake at night and the one likely recurring issue is maintenance and who is responsible for it.

Finding a solution will also not be that straightforward, says Ria Furriel, community insurance partner at King Price Insurance.

The Sectional Titles Act says the body corporate is responsible for the maintenance of the sectional title’s common property, which includes the outside of buildings, roofs, common gardens, parking bays, driveways, security systems and shared amenities.

Owners, on the other hand, are generally responsible for what happens inside their own units and any exclusive use areas the body corporate grants them access to. Although it sounds straight-forward, any sectional title owner will tell you disputes are common.

Furriel says for example, if the roof of a unit collapses due to the body corporate’s failure to maintain the common property structure, who is held? “Unless the owner can prove clear negligence by the body corporate, this would be for the owner’s account.”

In addition, if losses are incurred as a result of poor maintenance, an insurer may even repudiate the claim.

“Sectional title maintenance is a bit of a minefield. To complicate things, owners who are in arrears paying their levies, also do not make the lives of body corporates any easier. The Sectional Titles Schemes Management Act requires body corporates to have a maintenance budget but when owners fail to pay their levies, it affects this budget, which means there is not enough money available to do maintenance.”

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What body corporate must also do

The act also obliges body corporates to assess the value of all assets and produce a legally compliant 10-year maintenance, repair and replacement plan, which must be updated every year. Body corporates must also do a building valuation that must be updated every three years and insurance cover is a legal requirement.

Furriel says many insurers are using central management systems to administer claims to try and control the costs of insurance claims, ensure building compliance and extend the useful life of assets.

“These systems save time, money and headaches by allowing all claims to be logged electronically, be instantly authorised by the insurer and automatically scheduled with an approved service provider for immediate repair with no human interaction. In some instances, these systems also enable certain claims to be paid out with no excess.”

Traditionally, one of the biggest challenges of sectional title insurance has been a lack of updated information and transparency around assets. Furriel says insurers use the data they collect while handling claims to continuously update their underwriting philosophy, rating structure and excesses in line with current trends that include power surges due to load shedding and theft of solar panels.

“By maintaining their assets more efficiently, sectional title developments give insurers the ability to create more accurate risk profiles which often means lower premiums. They also enable predictive maintenance, with connected systems able to detect impending issues before they become problems. If more owners realise their critical role in this ecosystem and keep their levies up to date, a lot of maintenance challenges would be eased,” Furriel says.