Insurance policy renewals in sectional title schemes

Private Property South Africa

Insurance policies taken out on sectional title schemes are renewable on a yearly basis as this type of insurance is listed as a short-term policy. Short term usually describes something that happens within a year, so this would indicate that policies expire after one year unless they are renewed.

See more: Sectional title schemes explained

Each year, as part of their Annual General Meeting requirements, trustees will discuss what amount to insure their scheme for (buildings and common property replacement value) but this should be done in conjunction with written advice from their insurance advisor, says Michael Bauer, managing director of property company, which provides sectional title management and estate management services for homeowners’ associations.

The schemes insurance adviser should include what is needed, i.e. to insure the buildings, and public liability and fidelity cover, and should confirm that his advice has included all of these. It should also compare quotations from different companies, with these attached in full to the summary. The actual advice on what products and what amounts for each should be included by the financial advisor, so that the trustees have full information at their disposal.

In this way, the trustees can make an informed, timeous decision, while upholding their fiduciary responsibility towards their scheme.

Trustees should deal with the renewal a week or two before it is due to be renewed, and not wait for the notification from their insurers.

A meeting should be held where copies of the written advice (the Letter of Advice), comparative quotes, claims history and recent valuation of the scheme and replacement value, must be tabled. The minutes of the meeting should refer to the letter of advice, mentioning a resolution being passed to renew the insurance cover and mentioning the insurance company.

A valuation of the scheme needs be done every three years to get accurate replacement figures, he said, and as this should be done by a professional valuer, the body corporate will need to budget for the fees of having this done.

Read more: Are your body corporate rules reasonable?

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