Strata Insurance Explained: What's Covered, Valuations and Claims
A plain-English guide for Australian strata managers, committees and owners on what strata insurance covers, how valuations work, and how to make a claim.
Strata insurance is the policy that protects the shared parts of a strata-titled property in Australia. It covers the building structure and common property, plus liability and other risks the owners corporation is exposed to. In almost every state and territory, holding adequate building insurance is a legal obligation for the owners corporation (also called the body corporate or strata company), not an optional extra.
This guide explains what strata insurance covers, who it protects, how the insured replacement value is set through valuations, and how claims work. Requirements and terminology vary by state and territory, so always check the legislation that applies to your scheme and read your own policy schedule.
Is strata insurance compulsory in Australia?
Yes. In every Australian state and territory, the owners corporation for a strata scheme is required by law to insure the building and common property to its full replacement value. The key points:
- The obligation sits with the owners corporation as a whole, not with individual lot owners.
- Cover must generally be for the full reinstatement or replacement value of the building, not just market value.
- The exact rules, naming and minimum standards differ by jurisdiction — for example, NSW, Victoria, Queensland, WA, SA, Tasmania, the ACT and the NT each have their own strata or community-titles legislation.
- Premiums are paid from the owners corporation's administrative or general fund, which is funded by levies from all owners.
There are limited exceptions in some states for certain two-lot schemes or freestanding buildings where lots don't share a structure, but these are narrow. If you're unsure, confirm with your strata manager or the relevant state fair-trading or consumer-affairs body.
What does strata insurance cover?
Strata insurance is built around the shared property and the corporation's collective risks. A typical policy covers:
- The building structure — external walls, roof, foundations, floors and ceilings.
- Common property — lobbies, stairwells, lifts, hallways, driveways, fencing, shared plumbing and wiring, pools and shared gardens.
- Fixtures and fittings that form part of the building, such as built-in cabinetry, common-area carpets and shared air-conditioning plant.
- Damage from insured events — typically fire, storm, water damage, impact, malicious damage and similar perils listed in the policy.
- Public liability — protecting the owners corporation if someone is injured or their property is damaged on common property (commonly $20 million or more in cover).
- Office bearers' liability — protecting committee members against claims arising from decisions made in their role.
- Voluntary workers — cover for people who do unpaid work for the scheme, such as a committee member fixing a garden tap.
- Loss of rent or temporary accommodation — where a building is uninhabitable after an insured event.
- Catastrophe and extra costs — such as removal of debris, professional fees and meeting building-code upgrade requirements after a loss.
Many policies also offer optional extras like machinery breakdown, fidelity cover (theft by an office bearer or manager) and government audit costs.
What does strata insurance NOT cover?
Understanding the line between the policy and the individual owner is where most disputes arise. Strata insurance generally does not cover:
- A lot owner's contents — furniture, clothing, electronics, curtains and other personal belongings inside the lot.
- Improvements made by the owner in many schemes — items like upgraded flooring, renovated kitchens or fixtures installed by the owner may not be covered, depending on the scheme and policy.
- Landlord risks — loss of rent due to a tenant defaulting, or damage caused by tenants, which a landlord buys separately.
- A lot owner's personal liability for incidents inside their own lot.
- General wear and tear, gradual deterioration or lack of maintenance — insurance responds to sudden insured events, not the consequences of deferred upkeep.
Because of these gaps, owner-occupiers usually take out contents insurance, and investors take out landlord insurance, to sit alongside the corporation's strata policy. Lot owners should never assume the strata policy covers what's inside their four walls.
How is the insured replacement value set?
The insured replacement value (sometimes called the sum insured or reinstatement value) is the amount the policy will pay to rebuild the property. It should reflect the full cost to reinstate the building, not its sale price.
A proper replacement-value figure includes:
- The cost to demolish and clear the site after a total loss.
- The cost to rebuild to current building codes and standards.
- Professional fees — architects, engineers, surveyors and council approvals.
- Removal of debris and associated site costs.
- An allowance for cost escalation during the rebuild period.
This is why replacement value can be higher than market value — market price reflects land and location, while replacement value reflects construction. To set it accurately, owners corporations rely on an independent insurance replacement valuation prepared by a qualified valuer or quantity surveyor.
How often should a strata building be valued?
As a general rule, an independent insurance valuation should be obtained every three to five years, with the sum insured reviewed annually at renewal in between.
- Some jurisdictions mandate the frequency of valuations for strata schemes, so check your state's requirements — the obligation is not the same everywhere.
- Between formal valuations, the sum insured is usually indexed upward at renewal to keep pace with construction-cost inflation.
- A fresh valuation is worth commissioning sooner after major renovations, additions, or a sharp rise in building costs.
Keeping valuations current is the single most effective defence against underinsurance, discussed below. Software that tracks valuation due dates, certificates and policy renewals — the kind of insurance and compliance registers built into platforms like Orveya — helps committees avoid letting a valuation quietly lapse.
What is underinsurance and why is it a risk?
Underinsurance happens when the sum insured is lower than the actual cost to rebuild. It is one of the most serious financial risks an owners corporation faces.
The consequences can be severe:
- After a major loss, the payout may not cover the full rebuild, leaving owners to fund the shortfall through a special levy — sometimes tens of thousands of dollars per lot.
- Some policies apply an average (co-insurance) clause: if the building is insured for less than a set percentage of its true value, the insurer reduces even partial claims proportionally.
- Rising construction costs, material shortages and code upgrades can quietly erode the adequacy of a sum insured set years earlier.
The protections are straightforward: commission regular independent valuations, index the sum insured at each renewal, and review cover after any significant building works.
How does a strata insurance claim work?
When an insured event damages the building or common property, the claim is usually lodged by the strata manager or the committee on behalf of the owners corporation. The typical process:
- Make the area safe and prevent further damage — arrange emergency repairs (e.g. tarping a roof) and keep receipts.
- Document everything — photos, videos, dates, and a description of what happened.
- Notify the insurer or broker promptly — many policies require notification within a set time.
- Lodge the claim with supporting evidence, quotes and any incident or police report (for malicious damage or theft).
- Assessment — the insurer may appoint a loss assessor or builder to inspect and scope the damage.
- Excess — the owners corporation pays the policy excess; the insurer covers the balance of an approved claim.
- Repairs and settlement — works are carried out and the insurer settles, either by paying for repairs or making a cash settlement.
Where damage affects both common property and an individual lot — a burst common pipe flooding a unit, for example — responsibility can be shared, and the lot owner may need to claim contents separately. Clear records of what is common property versus lot property make these claims far smoother.
Who is protected by strata insurance?
Strata insurance protects the collective, but the benefit flows to several parties:
- The owners corporation as the policyholder and the entity responsible for common property.
- All lot owners, who share the building being rebuilt or repaired after a loss.
- Committee members (office bearers), through office-bearers' liability cover for decisions made in their role.
- Volunteers doing unpaid work for the scheme, through voluntary-workers cover.
- Visitors and the public, indirectly, via the public-liability section.
It does not stand in for an owner's personal contents or landlord cover, which remain each owner's responsibility.
Frequently asked questions
Does strata insurance cover the inside of my unit?
Generally it covers the building structure and fixtures that form part of the building, but not your personal contents — furniture, clothing, electronics and the like. Owner-improvements may or may not be covered depending on the scheme and policy. Owner-occupiers should hold contents insurance, and investors should hold landlord insurance, to fill these gaps.
Who pays for strata insurance?
The owners corporation pays the premium from its administrative or general fund, which all lot owners contribute to through their levies. So every owner pays a share, proportional to their lot entitlement, rather than buying a separate building policy individually.
What's the difference between market value and replacement value?
Market value is what the property would sell for, including land and location. Replacement (reinstatement) value is the cost to rebuild the structure after a total loss, including demolition, debris removal, professional fees, code upgrades and cost escalation. Strata insurance must be based on replacement value, which is often higher than market value.
How do I avoid my strata scheme being underinsured?
Commission an independent insurance valuation roughly every three to five years, index the sum insured at each annual renewal, and review your cover after any major renovation or addition. Keeping valuation dates and policy renewals tracked — rather than relying on memory — is the practical safeguard against a lapsed or outdated sum insured.
Can an individual lot owner make a claim on the strata policy?
Not directly in most cases — claims for common property and the building are lodged by the owners corporation or its strata manager. If damage affects your lot as well, you may need to claim on your own contents or landlord policy for the parts the strata policy doesn't cover. Report the incident to your committee or strata manager promptly so the corporation can lodge its claim.