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II live in a block of 4 units and our strata plan has been in existence sine 1978. Our OC recently had our strata valued and the valuation was $2.1 million. Our insurance is due and the value insured is for $2.6 million.
There appears no discrepency between what is valued and what is insured. Nor is there anything in the insurance policy that indicates any reason we should be insured for more than the valuation. There are the usual clauses in both the valuation and the insurance regarding improvements and allowane for removal of debris etc. There is not anything in our records that would indicate why the Strata is insured for more than it is valued.
The strata legislation requiring both valuations and insurance only says that the OC needs to insure the Strata for at least the valuation. It would appear just on the figures that our strata is over insuring by over 20%. I could understand and accept if the it was say around 10% or less but the over insurance seems quite a lot.
I remember years ago a friend of mine telling me over insurance was as bad as under insurance. Should our OC insure for the valuation or the amount nominated by our insurance company? What are the risks of doing either?
Thanks in advance
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It reall would depend on what exactly your policy covers you for. For instance, does it cover landscaping?
When it comes to building, the price of a new home rarely reflects the actual cost. When you go to those display homes centres, the cost of building the new home often does not cover the exterior landscaping, driveways or even some of the features found on the inside. So if your insurance policy is for the rebuild of the actual structure only, then yes it would cost more to “complete” your complex to original should the unthinkable happen and the building was damaged to the extent you would need a rebuild.
The $500,000 more that your building is covered for is $125,000 per unit. It sometimes pays to look at extra costs by dividing by the number of units and see whether that cost is justified in that way. Check out your policy first and see what is covered.Though not an expert by any means on insurance, I would think the big problem with over insuring would be the higher premiums you pay along the way. So in the unlikely event of a rebuild, you are insured for $1.5M but only need $1M perhaps you could have to look at how much money you have paid over the years for that extra $500,000.
As your insurance should be reviewed each year, you can always adjust it to cover a bit more each AGM to reflect the increase in value of your property and the projected increases of building materials, labour etc should the unthinkable happen.
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