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Strata insurance costs have been heading skyward for at least the last four years, according to a new report issued by the Strata Community Association (SCA) conducted by Deakin University.
According to Deakin’s research, the average strata insurance premium increased 12 percent between 2016 and 2020, rising from $3,305 to $5,017.
Body corporates are required by law to hold strata insurance on residential properties, covering damage to common areas and injury to people that might occur on the property’s grounds.
All Australian states and territories require owners corporations to ensure they raise sufficient funds from members to cover all annually recurring expenses, such as the strata insurance policy. So as insurance costs rise, so too do the levies imposed on the buildings’ shared owners.
Currently, more than a quarter of the costs of strata insurance policies go towards paying government taxes, stamp duties and levies, according to the report. If you’re in New South Wales, that figure is closer to 40 per cent.
SCA national president Andrew Chambers said it was time for the government to review the impact insurance taxes were having on home owners, and called for stamp duties on strata insurance premiums to be abolished or greatly reduced.
“Breaking down the total costs of insurance, premiums and the amount of duties, levies and taxes charged was a real eye-opener to just how much the consumer is paying in taxes just to take out a policy that is compulsory,” Mr Chambers said.
“Over the last five years strata communities’ insurance costs have spiralled upwards, from approximately $619 million total in 2016 to $1.08 billion in 2020.”
The rising premiums could be attributed to reinsurance market costs, global climatic events, Australian climatic events, building defects and cladding risks, Deakin found. And with higher policy costs comes more taxes.
Storm damage had resulted in $438 million in claims during the last four years, followed by water damage ($362 million) and fire damage ($248 million).
SCA will be working with the government and regulators, as well as the whole insurance supply chain, to improve consumer knowledge of the current legislation, according to Mr Chambers.
“Our weather will always be unpredictable, but our approach to insuring against it does not have to be.”
In real estate, insurance is a contract or policy that protects an individual or entity’s property from damages and losses, receiving reimbursement from an insurance company.