Getting to Grips with Body Corporate Insurance

Insurance is fairly straightforward for freehold properties; unless you have a tenant, you are responsible for insuring the building. But what happens when you live in an apartment or townhouse complex? Body Corporate Insurance is essential for all sectional title properties, helping to ensure that the building, communal areas, structural elements, and liability claims are covered, protecting property owners from costly surprises. Budget Insurance is here to help you understand how this type of insurance works, even if you're not a trustee.

Body Corporate functions and the role of Sectional Title Insurance

Affordability, security, and convenience make sectional title properties popular. In 2023, 67.4% of South Africa’s investment property sales were sectional title homes 1. Despite this, many renters and prospective homeowners don't understand what a body corporate is, or how it relates to sectional title properties.

What is a body corporate and how does it work?

A body corporate is a legal entity that governs a sectional title scheme. It consists of all unit owners and is managed by elected trustees who oversee the day-to-day operations of the property. Far from being a loosely assembled committee, the functions and rules governing bodies corporate are set out in the Sectional Titles Schemes Management Act, 2011 2. Their key responsibilities include:

• Maintaining common property, including gardens, corridors, lifts, and recreational areas.

• Managing the financial affairs of the scheme, including levies and budgeting.

• Ensuring compliance with sectional title laws and enforcing conduct rules.

• Arranging and maintaining insurance cover for communal areas and shared assets.

Since sectional title schemes involve multiple owners, shared risks are a reality. Some common risks faced by body corporates include:

• Property damage – Storms, fires, or vandalism can cause costly damage to shared structures.

• Liability claims – If a visitor or worker is injured on common property, the body corporate may be held legally responsible.

• Unexpected repairs – A lack of proper maintenance can lead to structural failures that require urgent and expensive repairs.

Without adequate insurance, these risks can result in unexpected financial strain on all unit owners. This is where Body Corporate Insurance becomes essential!

The role of Body Corporate Insurance

Body Corporate Insurance — also known as Sectional Title Insurance — is designed to protect sectional title schemes by covering damage to buildings, shared property, liability claims, and other unforeseen risks. A comprehensive body corporate product cover ensures trustees and owners are financially safeguarded against these risks.

What does it cover?

A Sectional Title Insurance policy typically includes:

• Building insurance – Covers structural damage from fire, floods, storms, and vandalism.

• Common property protection – Insures shared areas like clubhouses, lifts, and security gates.

• Public liability – Covers legal and medical costs if someone is injured on common property.

• Loss of rent – If you lose rent because your tenant had to vacate the building or any part of it due to damage caused by an insured peril, or if your tenant is unable to access your building as a result of an insured peril, but only until the building or the part that was damaged is fit for reoccupation.

• Fidelity guarantee – Protects against financial losses due to fraud by trustees, employees, or managing agents.

• Trustee indemnity – Shields trustees from personal liability for decisions made in good faith.

What isn’t covered?

Body corporate cover is comprehensive, but its focus is on immovable property and combined protection of the entire property. Sectional Title Insurance does not cover:

• Personal belongings inside individual units (owners need separate Home Contents Insurance).

• General maintenance or wear and tear.

• Damage caused by owner negligence or poor upkeep.

Who pays the excess?

As with any insurance, when a claim is made, an excess applies. For common property claims, the body corporate pays the excess from levies. However, if the damage affects only one unit—such as with a burst geyser—the owner would be responsible for paying the excess.

Sectional Title Insurance in action: real-world examples

Understanding body corporate cover is easier when looking at these common risk scenarios that highlight how this cover can make a difference.

Storm damage to common property

A severe storm sweeps through the area, causing significant damage to a complex’s clubhouse roof. Since the clubhouse is part of the common property, the body corporate is responsible for repairs. With adequate cover in place, the Sectional Title Insurance policy covers the cost of repairing or replacing the damaged roof.

The damage is confined to common property, so the body corporate pays the excess using funds collected from levies. Without insurance, unit owners would have to pay a special levy to cover the cost of repairs, which could cause financial strain.

A liability claim for a visitor injury

A visitor to the complex slips on a wet floor and sustains an injury. As Public Liability Insurance is typically included in the policy, the costs associated with the injury — such as medical bills and potential legal fees — will be covered.

Since the injury relates to an accident on communal property, the body corporate pays the excess. Without liability insurance, the body corporate could face expensive legal action and settlement costs, which unit owners would ultimately bear.

Fire damage in a shared braai area

A fire in the communal braai area spreads, damaging shared walls and part of an adjacent unit. Since the braai area is part of the common property, the body corporate is responsible for repairing the structural damage to the shared areas and any external damage to affected units.

Again, the body corporate pays the excess, since the incident started in a communal area. What is important to remember in this scenario is that while owners benefit from insurance covering communal repairs, personal belongings inside units need separate coverage through a home contents policy.

Each of these examples illustrates how, without Sectional Title Insurance, all owners would constantly be at risk of having to contribute to cover costly repairs or liability claims.

Best insurance practices for body corporate trustees and owners

Managing a sectional title scheme comes with responsibilities, and trustees must ensure body corporate product cover is well-maintained to provide optimal protection for shared property and liability risks.

1. Review policies regularly

Insurance needs change, so policies should be reviewed annually. If common property has been upgraded — such as adding a gym or security features — the policy must be adjusted to include these improvements. Increased property values also require updated coverage to avoid underinsurance. It is always advisable to consult with a reputable insurer (such as Budget Insurance) to ensure that the Body Corporate Insurance policy is tailored to your specific needs.

“Valuations should be revisited by the body corporate before every AGM. This provides an opportunity to adjust coverage for things like inflation, rising building costs and improvements to common property or individual units.”  Bill Rawson, Chairman of the Rawson Property Group

2. Ensure transparent communication

Owners should be informed about coverage, exclusions, and excess payments. Providing annual updates on renewals, premium changes, and claims processes helps prevent confusion. Making the insurance schedule easily accessible ensures all owners understand their rights and responsibilities.

3. Understand the excess structure

For claims involving common property, the body corporate usually pays the excess from levies. However, if damage affects only one unit — such as a burst geyser — the owner is responsible. Trustees should ensure all owners understand how excess on claims works to prevent disputes.

4. Conduct regular maintenance to minimise risk

Preventative maintenance reduces claims and keeps costs under control. Regular inspections of roofs, plumbing, and electrical systems help identify issues before they become costly. Common areas like stairs and parking lots should be maintained to minimise liability risks. Insurance does not cover damage due to neglect or wear and tear.

"According to Prescribed Management Rule 22 of the Sectional Titles Schemes Management Regulations, every scheme is supposed to have a professionally prepared, 10-year maintenance, repair and replacement plan (MRRP) that goes hand-in-hand with the Reserve Fund and contains the details of how it will be spent to keep the common property maintained and in a state of good repair."  Andrew Schaefer, MD at Trafalgar Property and Financial Services

While the body corporate insures common property, unit owners must take responsibility for their Home Contents Insurance.

Get a Budget Insurance quote

Protecting a sectional title property requires a reliable Body Corporate Insurance policy that offers full coverage for common areas and shared assets. Get a Budget Insurance quote today and let our team assist you with expert guidance suited to the needs of your sectional title scheme.