Strata insurance explained — what the scheme covers and what you don’t in NSW

The short version

In a NSW strata scheme, the owners corporation insures the building for everyone. Its policy covers the structure and common property — walls, roof, lifts, shared pipes, the pool. What it doesn't cover is anything inside your own lot: your contents, and usually the improvements you've made within your four walls. So there are really two policies in your life as an apartment owner — the scheme's building cover, which you help pay for through your levies, and your own contents cover, which is on you. The risk worth checking before you buy isn't whether the building is insured — it almost always is — but whether it's insured for enough.

What the owners corporation must insure

Under Part 9 of the Strata Schemes Management Act 2015 (NSW), the owners corporation has to take out a damage policy that insures the building for its full replacement or reinstatement value — enough to rebuild after a fire, storm or other insured event, including the cost of demolition and professional fees. Alongside that, the Act requires public liability cover for the common property — the protection that responds if someone is injured in the shared areas — and other cover such as workers compensation where the scheme employs people. These aren't optional extras; they're statutory duties, and the premiums are paid from the scheme's administrative fund, which your quarterly levies feed.

Where the building policy stops and yours begins

The dividing line is broadly the boundary of your lot. The scheme's policy looks after the structure and common property up to that line. Inside it — your furniture, appliances, clothing and belongings — is contents, and the building policy doesn't touch it. The grey area is fit-out and improvements: floating floors, a renovated kitchen, built-in wardrobes, blinds. Depending on how the strata plan is drawn and what the policy says, some of that can fall to you rather than the scheme. If a burst pipe in the ceiling floods your apartment, the building cover may repair the structure while your own policy is what replaces the carpet and the sofa. Buying an owner's contents-and-improvements policy is how you close that gap.

The number that actually matters: is the sum insured enough?

A building can be fully insured on paper and still leave owners exposed if the sum insured hasn't kept up with what it now costs to rebuild. Construction costs have risen sharply in recent years, and a figure set several years ago can sit well below today's rebuild price. To guard against this, the Act requires the building to be revalued periodically — broadly, at least once every five years — so the cover tracks reinstatement cost rather than drifting behind it. If a major loss hits a scheme that's under-insured, the insurer pays out to the policy limit and the owners fund the shortfall themselves, usually through a special levy. That's the mechanism that can turn a fire two floors away into a bill for you.

How to read the insurance before you sign

Most of what you need is disclosed in the strata paperwork rather than hidden. The section 184 certificate the owners corporation issues sets out the current insurance details, and a full strata records inspection lets you read the policy schedule and the most recent valuation for yourself. What you're looking for is a sum insured that reflects a recent valuation, cover that's current and paid up, and no sign in the minutes of a claim or premium dispute that hasn't been resolved. A premium that has jumped steeply is worth understanding too — it can point to a claims history, a defect or cladding issue driving the price up.

What to check before you sign

1. The current sum insured and when it was last valued. A valuation older than five years, or a sum that looks low for the building, is the classic under-insurance warning.
2. That the policy is current and premiums are paid. Confirm the cover hasn't lapsed and there's no outstanding premium the scheme is behind on.
3. What falls to you versus the scheme. Clarify where the building cover stops and factor in your own contents-and-improvements policy for everything inside the lot.
4. The premium trend and any recent claims. A sharp rise or a run of claims in the minutes can flag a defect, cladding or maintenance problem behind the numbers.
5. Public liability cover for the common property. Check it's in place and at a sensible limit — it's the scheme's protection if someone is hurt in the shared areas.

Common questions

Do I still need my own insurance if the building is covered?

Yes. The scheme's policy insures the building, not your belongings or, in most cases, the improvements inside your lot. An owner's contents-and-improvements policy is what covers those, and it's inexpensive relative to what it protects. Buying an apartment without one leaves a real gap.

Who pays if the building is under-insured after a major loss?

The insurer pays up to the sum insured, and the owners make up the difference — normally through a special levy split by unit entitlement. That's why the valuation date matters as much as the fact of cover. Our strata levies guide explains how those levies are raised, and unit entitlements decide the share you'd carry.

Is insurance a bigger risk in a new building?

The cover itself is straightforward in a new scheme, but premiums and claims can climb quickly if defects emerge — water ingress and failed waterproofing are common in the early years and push insurance costs up. If you're buying into a recently built block, read the insurance alongside our building defects guide, because the two often move together. Very small schemes — a two-lot block, for instance — can in some cases agree not to hold a building policy at all, which changes the picture entirely and is worth confirming.