Apartment building insurance.

Hello,

I got a strata report for a 26 apartment complex.... the building is insured for ~$5 million.

At 26 apartments it works out ~$192k an apartment.

The selling price of the apartment is around ~$700k.

Surely this is woefully underinsured? You would want to see $18.2 million, i.e $700k per apartment AT LEAST?

 

What the value of the land?

Surely, it is more than zero?

 

Land does not burn down.

Usually BCs have insurance to replace the building where the value is supplied by a registered valuer.

 

Land doesn't burn, but burnt properties still need to be cleared and land prepared

 

It does sound a little light on but construction would be around $250-275k + parking $25k/space + common areas + landscaping +10% demo & consultant costs.

 

I would rather be over insured than under insured. A townhouse I have elsewhere is insured for twice as much as what I paid.

 

Just because you insure a property for twice its value doesn't mean the insurance company will pay twice the value of the claim.

Over-insuring is waste of money just as under-insuring.

I agree with @Propertunity. As far as I know, body corporates have to obtain a formal valuation on a regular basis and must use that valuation as input into obtaining insurance.

 

I think you have a valid concern, as the insurance company will punish you for being underinsured if there is a total loss..

I agree, Insurance will only pay for replacement costs at the most.. or the indemnity value (depreciated) if opting for a cash settlement.

A valuation is not going to help.. you're still thinking land value.. e.g. Sydney property prices have doubled in the past few years, but construction costs haven't.
The body corp needs to get a quantity surveyor to determine the replacement cost, or better yet, the Insurance company should pay for the QS.

 

For our block of units in Queensland, our BC Manager requested an Insurance Advice Report from a firm of valuers. In this report, they advised an amount of insurance cover which allowed the BC to comply with the Act.