Updated · General information, not advice · TitanDC
What the law requires
The Sectional Titles Schemes Management Act and its Prescribed Management Rules set the baseline. A body corporate must insure the buildings and all improvements to the common property to their full replacement value, and must maintain that policy. A scheme’s own rules can add to this; they cannot remove the statutory duty.
- Buildings and improvements to common property, at full replacement value
- The risks the Act and its regulations list, including fire, storm, flood, bursting water tanks and pipes, and impact
- A replacement value recorded for each unit and exclusive-use area, which an owner may ask in writing to have increased, at their own additional premium
- Public liability cover of at least R10 million, or a higher amount the members decide on
- Fidelity cover against fraud or dishonesty by anyone handling the scheme’s money, for an amount the members decide and not less than the minimum the Community Schemes Ombud Service regulations set
- A replacement valuation of the buildings and improvements at least every three years, and a schedule of replacement values put to every annual general meeting
Who insures what: the line most people get wrong
The body corporate insures the buildings, and the buildings include the sections. Permanent fixtures inside a unit, such as built-in kitchen cupboards and sanitary fittings, generally form part of the insured building; they do not become household contents because the owner has to maintain them. Who owns or maintains an item comes from the sectional plan and the rules. Which policy insures it comes from the policy wording and schedule. The two answers are often different.
- The scheme’s policy: the buildings, including the sections and the permanent fixtures in them, and improvements to the common property
- The owner’s policy: movable contents and personal liability
- Renovations: tell the managing agent, so the replacement value recorded for your unit can be increased; the rules make the extra premium yours
- Geysers: the body corporate’s policy insures a geyser, but the owner whose section it serves must maintain, repair and replace it
- Excess: an owner is responsible for the excess on damage to a part of the building they are obliged to maintain, which includes their geyser
- Check the policy’s definition of buildings and its endorsements for floor coverings, owner improvements and other fixtures
Underinsurance is the failure that actually costs money
Replacement value is what it would cost to rebuild today, including professional fees, demolition and debris removal, and compliance with current building regulations. It is not the municipal value, and it is not what the units would sell for. Where the policy’s average condition applies and the sum insured is short, claims are reduced in proportion, including small ones. The rules require average to be applied unit by unit, never to the buildings as a whole, so the replacement value recorded against each unit matters as much as the total.
- Insure for rebuilding cost, not market value or municipal valuation
- Include professional fees, demolition, debris removal and compliance upgrades
- Have it professionally valued at least every three years, as the rules require, not once when the scheme was registered
- Building costs move: a figure set five years ago is very likely short today
What trustees are responsible for
Each trustee stands in a fiduciary relationship to the body corporate: they must act honestly and in good faith, in its interest and for its benefit. Letting the policy lapse, insuring for a figure nobody has reviewed, or failing to put the replacement value to the annual general meeting can all fall short of that duty. A trustee who breaches it is liable to the body corporate for the resulting loss; whether that happens depends on the conduct and the facts, not simply on a claim going unpaid. Trustees’ liability cover exists for this exposure, subject to its own terms and exclusions.
- Put the replacement value to the AGM and record the decision
- Keep the policy current and the premium paid
- Disclose anything the insurer would consider material, including known defects
- Consider trustees’ liability cover for the decisions the role carries
Questions worth asking before the next renewal
A renewal notice is not a review. These are the questions that surface the gaps, and an adviser should be able to answer them about your specific scheme rather than in general.
- When was the replacement value last professionally assessed, and by whom?
- Does the sum insured include professional fees, demolition and compliance upgrades?
- What is the public liability limit, and is it realistic for this scheme?
- Is there fidelity cover, and does it match the money the scheme actually handles?
- Do owners know that they maintain and replace their own geysers, and carry the excess on damage to parts they must maintain?
- Does each unit’s recorded replacement value reflect its renovations?
- Has anything changed, such as a new structure or a change of use, that the insurer has not been told about?
Common questions
Is body corporate insurance compulsory in South Africa?+
Yes. The Sectional Titles Schemes Management Act requires a body corporate to insure the buildings and improvements to common property for their full replacement value and to keep that cover in place. It is a statutory duty, not a decision trustees may take either way.
Does the body corporate’s policy cover what is inside my flat?+
Partly. The scheme’s buildings policy covers the sections as well as the common property, and permanent fixtures such as built-in cupboards and sanitary fittings generally form part of the insured building. Your movable contents and your personal liability are yours to insure. After a renovation, ask the managing agent to have the replacement value recorded for your unit increased.
Who pays for a burst geyser in a sectional title scheme?+
The Prescribed Management Rules settle most of it. The body corporate’s policy insures the geyser and the damage the water does to the building, but the owner whose section the geyser serves must maintain, repair and replace it, and is responsible for the excess on damage to the parts they must maintain. Damage to that owner’s movable contents falls to their own policy. Where a geyser serves more than one section, those owners share its costs pro rata.
What happens if the scheme is underinsured?+
Where the policy’s average condition applies, a claim is reduced in the proportion the sum insured bears to the replacement value. The Prescribed Management Rules require average to be applied to the individual unit or exclusive-use area concerned, not to the buildings as a whole. A unit recorded at two-thirds of its rebuilding cost can expect roughly two-thirds of a claim, including a small one.
Can owners be levied for an uninsured loss?+
Yes. If the scheme cannot recover a loss from insurance, the cost falls to the body corporate, which is funded by its owners through levies — often a special levy raised for exactly this. That is why the replacement value matters to every owner, not only to the trustees.
Sources
This page cites the legislation and regulators it relies on, so you can check it.
General information about insurance for community schemes in South Africa, not advice. What a particular scheme must insure depends on its registered sectional plan, its rules and its policy wording. TitanDC is an authorised financial services provider, FSP 8972.