No matter how hard you try to protect your home, there could still be unwanted incidents. As an owner, something that you have to carefully consider is the decision to get your property insured, so that it gets all the protection it needs.
Well, strata property insurance are policies that cover our homes and its surroundings. But first, do you know what the word ‘strata’ means?
Simply put, it refers to a type of property where individual units form part of a larger shared development, and the land it sits on belongs to the developer.
Strata property usually refers to high-rise buildings, but can also be used to refer to landed types! That’s right, there are a few such developments which are classified as such, like a townhouse (the best of both worlds – privacy of a landed property and the facilities of a condominium).
“Any person or body who has a duty or is responsible under this Act to maintain and manage any building shall insure such building under a damage policy with a licensed insurer in accordance with the part.”
The SMA 2013 says it’s the responsibility of property managers to obtain protection for the building in the event of the building being destroyed or damaged by fire, lighting, explosion, bursting or overflowing of water tanks or pipes, windstorms, and any other occurrence specified in the policy.
The mandatory coverage is applicable for the building, which include all the units that are individually owned, as well as the common property such as:
- Common areas
- Garden equipment
- Swimming pools
- Car parks
- Walls and windows
- Ceilings and floors
The policy will also cover the rebuilding or its replacement by a similar building, depending on the type of damage that has occurred.
With this coverage, you can always talk to your property managers for more clarification on what kind of coverage they’ve already obtained, as it could vary depending on the decision that they decided upon.
According to Sallewan Property Management Sdn Bhd Managing Director Salleh Wan Chik, insurance policies usually obtained by property managers include the mandatory ones such as Master Fire Policy, Public Liability Insurance, and either Error and Omission (E&O) or Professional Liability Insurance.
He states that the property managers will engage a professional valuer or surveyor every five years to provide a valuation report of the building’s Reinstatement Value, which will used to decide on the premium payment for the coverage.
Pros And Cons Of Strata Property Insurance
The good thing about strata property insurance is that the unit owners don’t have to worry about doing the research and deciding on which one to get.
All that will be entirely done by their JMBs or MCs. All they have to do is to pay the yearly premium to get covered. Sounds simple enough!
However, the mandatory indemnity that will be obtained by property managers only covers the property to a certain extent, and any additional coverage is optional.
The word ‘indemnity’ simply means a form of financial protection against loss or damage.
Salleh has said that most property managers will choose the more comprehensive Fire Insurance Policy, which will cover other perils and damages within the property.
A Very Common Misunderstanding That Homeowners Have
There are still some property owners who don’t fully understand what strata property insurance is all about, and that the coverage for the premium paid every year, is not that comprehensive.
Many are under the impression that should any loss or damage happen, they’ll be fully covered, including what’s contained inside their unit.
This is not the case, as the policy only covers the building(s) and the common property that’s located within the strata area.
“It will not cover whatever’s inside your unit. For that, you have to obtain a separate policy on your own,” Salleh confirmed.
Types Of Strata-Title Insurances And The Coverage Involved
The Master Fire Insurance Policy is mandatory, and is issued to the property managers or MC. It’ll cover the property and owners are required to pay the premium on a yearly basis.
Salleh said the policy will cover the property if it’s destroyed by fire or lighting, and includes other perils including explosion, overflowing of domestic water tanks, storm, flood, landslides, and other impact damages.
This policy also provides indemnity in the event of accidental damages affecting permanent fixtures and fittings, renovations, outbuildings, the swimming pool and guardhouse, among others.
Property managers or owners can also choose to extend the coverage for other types of risks such as Subsidence And Landslip, for properties located on or near slopes; Riot, Strike, and Malicious Damage (RSMD); and bursting or overflowing of water tanks, apparatus or pipes.
The Errors and Omission (E&O) policy covers the JMBs and MCs in the event that there’s a claim of negligence or inadequate work (involving the property managers or its staff).
Also known as the Professional Liability Insurance, with this policy, property managers would be protected if there was any damage or loss, resulting from a mistake made or breach of duty.
In addition to these, a Public Liability Insurance can be obtained for the coverage of accidental bodily injury, or accidental damage to the property, when using the common areas of the building.
A Fidelity Guarantee Insurance is also important to cover the property managers, as it protects them in case there is an embezzlement of funds by one of the staff, or if the staff is robbed during transportation of the funds.
The Burglary/Theft Policy is one of the optional policies which is recommended for homeowners to obtain. This covers loss or damage to assets within the strata property, as a result of:
- Forcible and violent entry
- Theft or any attempt by a person hiding in the premises
- Hold-up or armed robbery
Salleh stated that the JMB and MC can obtain this insurance, as well as individual owners: “If your JMB or MC decides to take it, it would cover the common properties in case of any theft, such as machinery parts."
How Much Does A Strata-Title Insurance Cost?
The purchase of a basic Fire Policy is compulsory, but most property managers would opt to take the more comprehensive Fire Insurance Policy instead, which will require an additional premium to be paid.
Now, for this one which covers other perils and damages, the rate is at 0.081% of the sum insured, according to the House Buyers Association (HBA).
A condominium has been badly damaged by a massive fire, and needs a rebuilding cost of RM1,000,000 for the main building.
It also requires a rebuilding cost of RM250,000 for the outbuildings including the swimming pool, footpaths, gates, and perimetre fencing.
To purchase that, take the total sum insured, and multiply it with the standard cover rate. The additional premium payable will be RM1,012.50 (RM1,250,000 x 0.081%).
Should You Pay For Two Premiums?
Property managers have always been advising strata property owners to get additional policies, other than what is already provided by their JMBs and MCs.
There’s the need to obtain additional coverage for the contents within their unit. This is because, in case of a fire, the master policy will only compensate the rebuilding of the unit, and not any renovations that were carried out or what was within (furniture, fittings, lighting, etc) the unit.
“If the homeowners have obtained a separate policy for the unit’s contents, then they’ll be covered for that as well. A Master Fire Policy will only cover so much, and is not comprehensive. If they want full and proper protection, they should look into getting one of their own,” Salleh confirmed.
It’s Always Better To Be Safe Than Sorry!
Now for the million-dollar question – Should I really get this insurance?
Yes! Strata property insurance is not only mandatory, but also essential for property owners to have complete peace of mind in case of any unforeseen circumstances (whether it’s man-made or God-willed).
We all can hope for the best but sometimes, calamities and misfortunes are inevitable. So, if you’re on the lookout for proper protection from the start, why not read up on how to choose the right life insurance cover for your home loan with The Complete Guide To MRTA, MLTA, MRTT, and MLTT!