The importance of adequate insurance cover in community schemes

Having adequate insurance cover in a community scheme, such as sectional title or home owners association, is crucial for several reasons:

1.      Protection of Common Areas:
Community schemes typically have common areas like passages, lifts, roofs, and parking areas. Insurance covers these shared spaces against the perils listed in the schemes’ insurance policy.

2.      Building Structure Coverage:
In sectional title, the insurance policy ensures that the entire building structure is protected against risks like fire, floods and earthquakes. This includes the walls, roof, and permanent fixtures within each unit, whereas in home owners associations, the scheme’s insurance covers the common areas only.

3.      Liability Coverage:
Insurance can provide liability coverage in case someone gets injured on the property. This coverage can protect both the body corporate or home owners association, as well as the individual owners, occupants and visitors.  Scheme executives may also be protected by trustee or directors’ and officers’ liability cover.  Lastly, should the scheme employ staff, employer’s liability is also strongly recommended.

4.      Financial Security for Owners:
Having adequate fidelity guarantee insurance mitigates financial risks for schemes against losses caused by theft or fraud committed by a scheme executive or a managing agent.

5.      Compliance with Legal Requirements:
The sectional titles schemes management act, a constitution or memorandum of association, as well as the community schemes ombud services act, places the responsibility of ensuring adequate insurance cover is in place on the scheme executives.  Certain legislation further prescribes the perils to be insured against. Failing to comply with these regulations could lead to legal issues for the scheme or individual members.

6.      Peace of Mind:
Knowing that there's comprehensive insurance in place gives both the scheme executives and individual members peace of mind. They can feel secure that unforeseen events won’t lead to insurmountable financial burdens.

It's important for the scheme executives and individual members to understand the extent of coverage, exclusions, and limitations of the insurance policy, to ensure that it adequately protects their interests. Additionally, regular reviews of the insurance policy and the replacement values are essential to keep it up to date with the changing needs and the value of the property. 

The Bellbuoy Group, leaders in property management since 1996, takes this responsibility very seriously and encourages the scheme executives to ensure adequate cover is in place, at any point in time.  We have scheduled compliance planners for every scheme we manage, which not only reminds both scheme executives and our own staff of upcoming compliance related issues, but we also report on these items, every month, to our clients via our comprehensive community reports.

For more information, or for any assistance regarding your community scheme, contact the Eastern Cape’s largest community scheme managing agent, The Bellboy Group, on 041 374 4444 or visit us at www.bellbuoy.co.za.