The High Life: Insurance issues confuse some apartment owners
More and more Kiwis are choosing apartments over houses. In this High Life series, Homed explores what that means for the way we live.
Apartment owners are being caught out by confusion about their buildings' insurance policies.
In most apartment buildings, the body corporate takes out an insurance policy for the premises – the "house" part of traditional house and contents cover.
Individual unit owners pay for their share of that through their body corporate levies, and arrange their own contents cover.
But Insurance and Financial Services Ombudsman Karen Stevens said some owners did not understand how the cover worked.
"We have had cases where an owner personally insured two of four apartments in a group for several years and wanted a refund of premiums when she found out that the body corporate also had paid premiums for insurance on the two units over the same period," Stevens said.
"The other aspect where issues can arise is where an individual owner wants to make a claim for damage to the apartment - if the policy is held by the body corporate as the insured, an individual cannot make a claim for a unit without the body corporate's agreement to make the claim."
That can also be a problem when things go wrong.
Usually, homeowners can take a complaint against their insurance company to an external disputes scheme if they feel a claim is not dealt with properly.
But under a body corporate structure, they would not be the primary policy-holder.
Susan Taylor, of Financial Services Complaints Ltd, said in those cases, her organisation would usually advise apartment owners to ask the body corporate if they could be the complainant.
"It is their apartment, their damage and if the body corporate doesn't want to be the one to take up the matter … they can authorise the individual apartment owner to act on their behalf."
Her office had dealt with one case from Christchurch where buyers of an apartment had assumed the body corporate's insurance policy would cover them for loss of rent when they bought an earthquake-damaged apartment that needed repair.
But the insurance company argued only the original owner was covered.
Richard Godman, Vero's manager underwriting personal insurance said owners of apartments in smaller complexes that did not have a body corporate should try to insure with the same company to avoid gaps in cover. "This isn't always possible due to individual owner preferences.
"It's important that you tell your insurer that your apartment is one of many that make up a multi-unit complex, so that the insurer can make an informed decision about the insurance cover they are prepared to provide and the terms that they will offer," he said.
Godman said contents insurance would provide useful benefits for apartment owners, such as cover for legal liability if their negligence caused damage to others' property. "In most cases you'll get some temporary accommodation cover if your apartment is considered uninhabitable following damage that is insured by the policy."