The Importance of Communal Insurance and what types of insurance are required.

In this Ninth episode of our communal property essentials series I’m going to cover the communal insurance requirements for your apartment building or resort, and the importance of liability protection for your management committee.

Episode 9 of our Communal Property Essentials Series.

Video Transcript

In this Ninth episode of our communal property essentials series I’m going to cover the communal insurance requirements for your apartment building or resort, and the importance of liability protection for your management committee.

While its easy just to focus on the day to day operation of your building, you also need to consider a few worse case scenarios. 

Hopefully you never need to deal with these kinds of emergencies, but they do happen.  There could be a major fire, earthquake, flood, someone could slip and injure themselves, someone could god forbid drown in your swimming pool.

While you can take measures to reduce these risks, many of them cannot be eliminated completely.  So in addition to prevention you should also take measures to reduce your liability exposure.  And one of these steps is getting a few insurances in place.

Having suitable communal insurance is actually a legal obligation of the committee, so if you fail to meet this obligation the committee itself and its members could be held liable for any costs which would have been covered by a insurance policy had it been taken out.

Minimum Requirements

It is a legal requirement for your Management Committee to organise fire, lightning and earthquake insurance for the building at a suitable level to cover the full estimated rebuild costs of the communal areas of your building.

The policy should not be based on the rebuild cost of the entire building, is it only for the rebuild cost of the shared areas.  This means any part of the building shared by more than one-unit owner such as corridors, elevators, pool areas and so on.   

This is important to know as the policy will be far cheaper than a full rebuild policy but many insurance brokers will only give you the more expensive option unless you know to ask.

Additional Communal Insurance Coverage for your building

While its not a legal requirement under the immovable property law, I also suggest adding coverage for third party liability.  Your communal building is a high-risk area, with items like lifts, pools and car parks which all pose a high potential risk of accident/injury to a vendor or the public.

While I strongly suggest having third party liability insurance, Its important to note that under the Regulations, contracting insurance for any other risks for the building other than Fire, Lightning & Earthquake requires a majority decision at a properly formed general meeting. 

If you want to add this coverage but have not had this vote, and the AGM is a long way off you will need to call an extraordinary general meeting.  There is no mandatory requirement at an EGM to have committee elections, or presentation of the accounts.  so you can simply hold this meeting with the single agenda item.  The EGM does however have similar rules to the AGM which need to be followed otherwise the meeting could be invalid, if you have a copy of my book you will find it contains step by step instructions for calling an EGM to help you avoid this.

Limits of insurance responsibility.

It is each unit owners in your buildings own responsibility to take out private insurance for their own apartments. 

You can of course assist your unit owners by negotiating a group policy for unit owners with a single provider which can work out much cheaper, however you must make this voluntary and any unit owner who does not wish to be included should not pay anything towards this from their communal fees.

Additional Communal Insurance Coverage for your committee.

As a member of the committee you are an elected official of the property owners. You have an appropriate ‘Duty of Care’ to act always in the best interests of the property owners, and to manage, administrate and maintain the building in accordance with the Regulations.

By joining the committee you take on a responsibility, and with this responsibility comes some risk.  If your committee fails to meet your ‘Duty of Care’ it can be found negligent which can leave you open to civil and/or criminal liability.

However, the vast majority of building public liability policies do not cover any additional coverage for legal expenses or compensation awards against the committee for any claim by a PROPERTY OWNER or public authority.

I have previously mentioned many good reasons to join your building’s management committee in my articles and books. While there is increased liability by taking one of these committee positions, in my opinion, the benefits from being in direct control of your significant financial investment far outweigh its risks and you can reduce this risk by taking out a dedicated committee liability insurance coverage. 

When taking out your standard insurance police always ask to include additional coverage for the committee’s liability when taking out your buildings insurance policy. Make sure that they fully understand that this is not general or public liability. It needs to specifically cover the management committee to cover any legal costs and claims for any civil/criminal action submitted against them by a property owner or government/regulatory body. 

Not all insurance providers offer this as an option, if yours does not it may be time to look at switching providers.  If you want to know who I recommend to all my clients, let me know in the comments and I will send you some details.

One of the other ways you can help reduce your exposure to liability is consider the use of a communal property professional to assist your committee.  While some management committees are well suited to self-managed their buildings, many have no option but to use a communal property manager. 

You will need to weigh up the pro’s and cons of each option, and this will be the subject of the next episode in the communal property essentials video series.


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Russell Flick

International Property Professional, Public Speaker & Author of 'The Ultimate Committee Handbook'. In addition to his published books, Russell is a public speaker, columnist and founder of, the online information portal for property owners to get support and advice on all aspects of communal property ownership and management. Russell is currently in the process of publishing his second book (expected to be released in 2018) the 'Step-by-Step Guide to Owning Investment Property'. While the first book is aimed as a support resource for committees, giving step by step instructions on the management and administration of their buildings. This second book is is a practical guide to assist property owners and investors with information and procedures in acquiring, maintaining and maximizing their property investments.