Strata insurance Explained for Property Buyers
Strata insurance is the building policy taken out by the owners corporation to cover the structure and shared areas of a strata scheme. Every owner contributes to the premium through their levies, but it does not cover the inside contents of your own unit.
What Does Strata insurance Mean?
Strata insurance is the policy that protects a strata building as a whole. Rather than each owner insuring their own walls and roof, the owners corporation holds one policy over the building structure and the common property, such as the roof, external walls, foyers, driveways and lifts. It usually also includes public liability cover for incidents on shared areas.
Buyers tend to meet strata insurance in two places. The first is the strata records, where the certificate of currency, the sum insured, the excess and any claims history sit alongside the meeting minutes. The second is the levy notice, because the premium is paid out of the administrative fund and is often the single largest line item driving what owners pay each quarter.
The practical point is that you are buying into a shared policy you do not control. If the building is under-insured, has a high excess, or carries a run of claims, those issues become part of your ownership costs and risk from the day you settle. A good insurance position quietly protects your investment; a weak one can turn into a special levy or a repair bill you never budgeted for.
Why This Matters for Buyers
Insurance is one of the clearest signals of how a building is being run. A current policy with a sensible sum insured and a recent insurance valuation suggests a committee that pays attention. A policy that has lapsed, been renewed at the last minute, or relies on an old valuation suggests the opposite, and that tends to show up elsewhere in the records too.
Premiums feed directly into levies. Where a building has had repeated water ingress claims, cladding concerns or storm damage, insurers can lift premiums sharply or raise the excess. That cost is shared across every lot, so a unit that looks good value on price can carry noticeably higher holding costs than a comparable unit in a better-maintained block.
The excess matters more than many buyers realise. If a building carries a high excess for water damage, smaller leaks may end up being paid by the owners corporation or by individual owners rather than the insurer. Knowing how the excess is handled, and whether the by-laws pass it on to the lot responsible, helps you understand your real exposure.
Finally, strata insurance shapes what you need to insure yourself. Owner occupiers generally still need contents cover for belongings and internal fit-outs that are not part of the building policy, and investors usually need landlord insurance. Getting this wrong leaves a gap that only becomes obvious after something goes wrong.
Common Mistakes Buyers Make
Strata insurance is easy to skim past because it sits in a dense bundle of paperwork. These are the oversights we see most often.
- Assuming the building policy covers everything inside the unit — the strata policy is built around the structure and common property, so belongings, and often some internal fixtures, need separate cover arranged by the owner.
- Only checking that a policy exists — a certificate of currency confirms the building is insured, but it does not tell you whether the sum insured reflects the true cost to rebuild.
- Ignoring the claims history — a pattern of repeated claims, particularly for water or roof issues, often points to an underlying defect that has not been properly fixed.
- Overlooking the excess — a high excess can shift the cost of everyday repairs back onto owners, and some by-laws allocate it to the lot where the damage started.
- Not comparing premiums across similar buildings — a premium that is well above similar blocks nearby is worth questioning before you commit, as it can signal risks the insurer has priced in.
How This Shows Up in the Illawarra
Much of the unit stock in Wollongong, North Wollongong, Corrimal, Fairy Meadow and around Shellharbour is in older walk-up blocks built from the 1960s to the 1980s. Many of these buildings are sound, but age brings roof, balcony and waterproofing issues, and those tend to appear in the claims history and in how insurers price the risk.
Coastal exposure is a real factor here. Buildings close to the water deal with salt air, wind-driven rain and corrosion of balustrades and concrete reinforcement. When a block near the beachfront has a run of water ingress claims, it is worth asking whether the cause has been fixed or whether the building is simply claiming the same damage each time a big storm rolls through.
Location-based risk also plays a part. Some Illawarra pockets sit near creeks, low-lying ground or the escarpment edge, where flood and stormwater considerations can affect how a building is insured. When we review a unit for a buyer, we read the insurance documents alongside the minutes and the capital works fund to build a full picture, rather than treating the policy as a box to tick. Our suburb guides cover some of these local differences in more detail.
Practical Takeaway
Treat strata insurance as part of your due diligence, not an afterthought. Ask for the current certificate of currency, the sum insured, the excess, the date of the last insurance valuation, and any recent claims. Read the minutes to see whether claims are being discussed and whether the underlying causes are being repaired.
Then think about your own cover. Work out what the building policy does and does not include, and arrange contents or landlord insurance so there is no gap from settlement. If anything in the insurance records looks unusual, raise it with your conveyancer or solicitor and your strata inspector before you exchange.
In plain terms: when strata insurance comes up, confirm the building is properly insured, check what it costs and why, look for patterns in the claims history, and make sure your own policy fills the gaps.
Frequently Asked Questions
What does strata insurance actually cover?
It generally covers the building structure and common property, plus public liability for shared areas. It does not usually cover your personal belongings, which need their own policy.
When will I come across strata insurance as a buyer?
Usually when reviewing the strata records or a strata report before exchange, and again when you look at the levies, because the premium is funded through them.
Is a building with a lot of insurance claims risky to buy into?
Not automatically, but repeated claims for the same type of damage often point to an unresolved defect. It is worth understanding the cause and whether repairs are planned or funded.
Can I negotiate on price because of strata insurance issues?
You cannot change the policy before you buy, but evidence of under-insurance, rising premiums or ongoing claims can be a legitimate factor in how much you are prepared to offer.
Should first home buyers care about strata insurance?
Yes. First home buyers are often working to a tight budget, and an unexpected levy rise or excess payment can put real pressure on household finances in the early years.
How does strata insurance affect timing?
It mainly affects your preparation before exchange. You need time to obtain and read the records, and you should have your own contents or landlord cover ready to start from settlement.
How does strata insurance fit into the NSW buying process?
In NSW, owners corporations are required to insure the building and hold public liability cover. Buyers typically check the insurance position through a strata inspection report or the records, with guidance from their conveyancer or solicitor.
Can a buyers agent help with strata insurance?
A buyers agent can review the insurance details alongside the minutes, levies and maintenance history, flag concerns, and help you weigh how they affect value and risk before you commit.
If you are weighing up a unit or townhouse and want a second set of eyes on the building's insurance position, we are happy to talk it through. Reach out whenever it suits you.
