Owners Corporations are responsible for holding building insurance cover, and it’s important that your property is valued correctly when determining your insurance policy. When you take out a new policy, your insurer will likely request a valuation. However, as the years go by, property values and building costs typically change, as does the value of your property. For that reason, strata schemes should regularly update their insurance valuations to ensure accurate coverage. Here’s what you need to know about strata insurance valuations.
How often should strata schemes conduct an insurance valuation?
Most insurance companies won’t contact you and request a new valuation, which is why Owners Corporations need to take the initiative. At More Than Strata, we recommend updating your insurance valuation every three years to safeguard yourself against underinsuring and other potential issues.
Insurance valuations cost money, so it’s an expense that should be voted on or agreed upon in a General Meeting. Alternatively, some Owners Corporations may make it part of their charter to have a valuation completed every three years, in which case, all owners already know that part of their strata fees will be used for this purpose.
Let’s take a look at some of the reasons insurance valuations are so crucial for strata schemes.
Underinsuring your strata property can have significant consequences and very few benefits. The only perceived benefit is that your strata insurance premiums might be slightly cheaper. However, imagine a flood or fire destroyed your entire strata building. When you make your insurance claim, the insurer may determine that you have deliberately undervalued the property to obtain cheaper insurance. This can result in denial of your claim.
Even if they pay on your claim, the amount may be less than what’s required to replace or repair the structure. Insurance valuations also protect you from being overinsured, which can result in expensive premiums.
Faster claims process
Processing an insurance claim is much faster when there are no questions about the correctness and validity of your policy. When your insurance company assesses your claim, the presence of a recent insurance valuation lets them know that the policy is accurate. Or, at the very least, your Owners Corporation has taken steps to ensure the policy and valuation are as accurate as possible.
Stay up to date with replacement costs
We’ve seen the cost of building and materials skyrocket in recent years, and an insurance valuation isn’t about determining the property’s value for real estate purposes. Rather, it’s about determining what it would cost to repair or replace any part of the building that becomes damaged.
If your insurance valuation doesn’t consider these increased costs, you could find yourself underinsured in the sense that it would cost more than your insured amount to rebuild the property (in the event of a natural disaster or other circumstance that makes the building inhabitable.
Looking for expert strata management services?
We’re the team to call if you need professional, reliable strata management services to ease the burden on your committee. More Than Strata provides personalised strata management services to help your community thrive. Contact us today for more information.