Body Corporate Insurance

Perhaps the most important function of a Body Corporate as set out in the Act is the requirement that the Body Corporate must insure all of the buildings in its name. Following the recent Christchurch earthquakes and the discovery that many Body Corporate buildings there were under-insured, we believe it is sensible to insure the buildings for their full replacement value. To do this, it is necessary to engage a Registered Public Valuer to update the Insurance Valuation of the Buildings every year.

As protections for all Unit Owners, the Act requires (a) that proceeds of any claims made under the Body Corporate's insurance policy must be fully used to reinstate the damage in respect of which the claim was made and (b) that an Insurer cannot cancel a Body Corporate insurance policy without first giving 30 days notice to every Unit Owner and Mortgagee.

We have encountered instances where an individual Unit Owner has directly insured a Unit in his or her own name. Not only is this a breach of the Act, but it is also often more expensive.

We use a range of reputable Insurance Brokers and we challenge them each year to come up with the best value for money insurance quote. Claims for some interior damage events affecting individual Units are often admissible under a Body Corporate's buildings insurance policy.

It is important to note that all Unit Owners should arrange and put in place their own comprehensive contents insurance policy if they occupy their Units or if they let their Units on a fully furnished basis. In those cases where their Units are let on an unfurnished basis, there are usually still the carpets, drapes and some appliances to think about as these are owned by the Unit Owners and not the Tenants. Sometimes, an extension to cover these chattels may have been arranged as part of the Body Corporate's buildings insurance policy.

It is important that the Lease Agreement applicable to a tenanted Unit contains a condition binding the Tenant (at the cost of the Tenant) to arrange and put in place a Tenant's comprehensive contents insurance policy including a Tenants' Liability extension. This latter extension will protect the Tenant against recovery action by the Body Corporate's Insurer where the Tenant may have caused damage that has been reinstated by and at the cost of that Insurer.

Please contact us for further information.

Return to the Unit Owners Seeking Information page.

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