Building insurance - queries with strata manager (WA)

I have a few questions regarding the building insurance for our complex of 12 units (organised by the strata manager).

1) Are we over-insured? The insurance policy has a building sum insured amount of $3,500,000, but the last valuation (April 2016) was for a BSI of $2,964,500. I'm not sure how much the extra $500k would affect the premium.

2) Is the premium reasonable? Our current premium is approx $6,000 per year (12 units, insured amount $3.5m).

3) What is a reasonable charge for an insurance valuation? We were charged $1024 for last year's valuation... seems on the high side?

4) Finally, our Strata Manager is a representative of an insurance agency who act on behalf of the insurer and receive commission upon insurance policy renewal. Is this sort of arrangement common?
Thanks in advance for any advice on the above!!

 

some thoughts,
1. if the sum insured is greater than the replacement value you may be paying premium that you don't need. You do need to make sure that you have covered all the costs though, the insured amount may also include common cover, demolition and rebuild costs, council and building fees, etc.
2. shop around, difficult to say without knowing the building.
4. this is standard, the only requirement is that they disclose their commission.

have a look at wfi.com.au strata insurance, they don't require a sum insured value, but insure on a like-for-like replacement. They don't pay commissions to strata managers either.

 

What about cost to demo and clear the site if it needs to be rebuilt? Also factor in interest payments whilst building and loss of rent until it'a complete

 

And add in the possibility that building regulations may have changed and rebuilding will have to be to the new regulations, which may require a higher level of materials or fittings.
Marg

 

I passed your query on to one of our brokers who does a lot of insurance for strata buildings, these are his responses:

1. This would depend on how the valuation was conducted, i.e. was it an insurance valuation or a general one? Insurance valuations take into account things like removal of debris, architects & increased building costs, town planning & council fees & charges etc. and is generally higher than the value of the building alone.
2. This would depend on claims history, location, current excesses and market trends, $6,000 seems reasonable for current market positioning but would need to know more details.
3. Charges vary by organisation and would be best to contact multiple valuers to ascertain the best value for money.
4. Whilst the commission for placement of insurance policies are standard in the industry the agency situation is only one way of purchasing insurance you can also go direct to the insurer or our recommendation would be to contact an AFSL holding insurance broker who will work for you and not the insurer when representing your interests.

If we can be of any assistance to you feel free to let me know.