CHU: What COVID-19 Means to Your Strata Insurance

Strata owners are feeling the impact of COVID-19 on their properties.

The uncertainty of the virus on the economic future of Australia has put added pressure on an already weakening rental market.

For those whose strata property is a key income stream – vital in cash-strapped times – and for owner occupiers who see their property as their home, it is not an easy time.

Job losses and reduced working hours have seen tenants wanting to negotiate lower rents. Some financially strapped tenants are sharing accommodation or even moving back  in with their parents. With international students, migrants and international tourists unable at present to enter the country, more rental properties may become available. In some cases Airbnb rentals are converting to long-term rentals, adding to a surplus of strata properties.

State governments are encouraging landlords and tenants to negotiate on rent reductions or deferrals if then tenants capacity to pay their full rental obligations are affected by COVID-19.

Despite these added pressures owners still need residential strata insurance as it’s compulsory in Australia and with these uncertain times it’s vital to ensure their properties are protected. However, some are struggling to continue to cover their property adequately.

But there are ways of reducing premium costs and still feel safe that they are properly covered for disasters and misfortunes.

One very direct way is to increase the excess, which may lower the cost of the overall annual premium. However, owners need to be aware of the outcome if a claim has to be made and weigh up the risks.

Some inclusions in the cover, which may not be necessary, can be removed. This may include things like floating floors, machinery breakdown, fusion of electrical motors or emergency accommodation. But, again, owners need to be fully aware of the outcome of removing some of the options.

Some insurance companies are also now providing tailored insurance cover to help clients reduce their premium costs.

For example, Flex insurance can be customised to suit the unique needs of the strata building, small to large. It allows clients to only pay for what they need. Flex also allows clients to tailor cover through arrange of optional inclusions based on the buildings and owners’ corporation’s (body corporate) needs.

Some insurance companies are offering short-term policies to help owners through these tough times.

Many insurance companies are working with their clients who are suffering financial hardship or cash flow issues in paying their insurance. Owners should contact their strata manager. broker or insurance company to discuss possible options.

Another way of easing some of that financial burden is to look at strata insurance premium funding. Insurance premium funding companies offer a loan to the body corporate or owners corporations for up to a 12-month period at a fixed interest or interest on a reducing balance to cover the insurance costs. This means the owners can pay their premium by installments rather than in on full-year payment and smooth the impact on cash flow.

Something which may be overlooked in these trying times is to make sure the property value is always up to date, especially when it comes to renewal time. This will not only determine that the building is sufficiently covered, but also optimise premium costs.

There are some practical “hands-on” ways to possibly reduce premiums. Making sure the property is well maintained, extra safe and secure could not only help to reduce premiums, it could also potentially reduce the size of a claim should there be an incident. Simple things like installing a security system or adding extra window, gate and door locks could also help reduce premiums.

Impact of COVID-19 on Claims and Repairs

While insurance companies continue to process claims as quickly as possivble for their clients COVID-19 has also created some issues for repairs.

For example, most insurance companies will, if the owner wishes, temporarily suspend the claim if the delays are linked to COVID-19 and carry out repairs as soon as it is viable. However, emergency repairs can be carried out immediately by insurance panel builders, who take significant safety precautions to ensure infection protection.

If multiple lots are damaged some effected residents may wish, because of concerns about the spread of the virus, to have repairs postponed whilst others wish to proceed. So long as it does not cause an increased risk to other residents, the lots who would like their repairs to proceed can do so. This needs to be arranged via their strata manager or broker. The remaining affected lots can be repaired at a later date.

It’s still important to continue to carry out regular fire safety checks and maintenance on common property in these times.

Landlord Insurance

Landlord insurance has become a major issue with COVID-19.

Landlords cannot claim on their insurance voluntary rent reductions they offered to tenants due to COVID-19. They may still be able to claim normal rental defaults, depending on their policy. Most insurers are not changing the cover on renewals of pre-COVID policies. This should be discussed with the owner’s broker or insurance company.

However, most insurers have ceased to offer rental default cover for new customers.

It’s important to remember landlord insurance continues to cover building and contents and liability protection – the most common reason for claiming landlord insurance.

Many of the short-term issues for strata owners from COVID-19 will no doubt gradually dissipate but some of the long-term issues will be with us for a while. The economy is likely to take some time to recover and the effects will continue to bring hardship for some people. For example, paying insurance premiums or even paying rent will continue to be an issue.

However, the insurance industry remains committed to helping its customers and community through these difficult times.

Author: CHU Strata Insurance



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