We all know that building defects aren’t covered by strata insurance. You didn’t? Well, now you do. Your strata insurance covers the scheme for accidents and incidents, not wear and tear or, indeed, problems that were there when you bought into the block.
But what about the effects that defects have on your insurance? If an issue with the fabric of the building makes it less safe, does that affect your insurance coverage or premium.
Our sponsors CHU Insurance have the answer …
A startling insight into the number of strata buildings with defects – according to UNSW’s City Futures Research Centre, 75 per cent to 85 per cent of owners’ corporations have identified major defects in their buildings.
Nearly all insurance contracts have exclusions relating to defects, both known and hidden. So how do defects potentially affect the insurance of a particular building?
A proactive approach in rectifying any defects is beneficial for all parties involved. This will maximise insurance coverage and avoid the risk of a claim denial due to defects or defective parts.
It is important to be aware of the risks associated with defects as it may compromise the safety of the building. For an owner, it may have personal financial implications and potential exposure to legal action.
The cost and type of insurance cover available for a building with defects will vary between insurers and their underwriting guidelines for defects. Generally, an insurer will consider a number of factors, including:
• the severity of the defects
• the age of the building
• whether there is or will be legal action relating to defects
• are there plans for rectification of defects
• the owners attitude to rectification
There are a number of sources of valuable information to determine the extent and severity of the defect and to decide the insurance cover available, such as:
• Professional reports from engineers etc.
• A builders scope of works to rectify the defect
• A copy of any building contracts showing the work required and associated cost
• Minutes of Body Corporate meetings showing the plans for remedial action
The important thing for a building with defects is to provide as much information as possible to achieve the best insurance outcome based on their specific circumstances.
This article was supplied by CHU Underwriting Agencies you can read more on this topic HERE.