When to Review Strata Insurance: Valuations, Sums Insured and Underinsurance

Reviewing strata insurance is not simply a once-a-year administration task. For an owners corporation, body corporate, strata committee or strata manager, the review should test whether the policy still reflects the building, common property, likely reinstatement costs and any applicable state or territory insurance obligations.

A key part of that process is the relationship between a strata insurance valuation, the sum insured and the risk of strata underinsurance. If the policy amount is based on outdated figures, incomplete building information or assumptions that no longer hold, the scheme may face a shortfall after a major insured event.

This article explains when to review strata insurance, how reinstatement valuations affect policy decisions, what sums insured are intended to do, and how committees can approach renewal discussions in a more informed way.

Why strata insurance needs regular review

Strata insurance is designed to protect shared property and common areas within a strata-titled building or scheme. Depending on the policy and the property, this may include the building structure, roof, lifts, stairwells, driveways, shared services, common area fixtures and public liability cover.

An outdated policy can create practical, financial and compliance risks. Buildings age, construction costs change, common areas are upgraded and legal obligations may vary by jurisdiction. A policy that was appropriate several years ago may no longer match the current reinstatement cost or the way the property is used.

Regular reviews help a scheme consider whether:

• the insured amount reflects current reinstatement costs rather than historic estimates;
• renovations, additions or upgraded common property have been disclosed and considered;
• excesses, exclusions and sub-limits remain suitable for the scheme's circumstances;
• the policy aligns with relevant state or territory strata insurance requirements;
• the owners corporation has clear records to support renewal and claims decisions.

For broader background on the different parts of a policy, including coverage limits and optional covers, see Understanding the Layers of Strata Insurance.

What a strata insurance valuation is really measuring

A strata insurance valuation is generally concerned with the amount required to reinstate or replace the insured building and common property after major damage. This is different from the property's market value.

Market value is influenced by land value, location, rental demand, buyer sentiment and broader property market conditions. A reinstatement valuation for strata focuses on what it may cost to rebuild, repair or reinstate the insured property in line with relevant requirements after an insured event.

Depending on the building and the valuation brief, reinstatement considerations may include:

• demolition, debris removal and site access constraints;
• current construction materials and labour costs;
• professional fees, such as consultants, engineers or architects where relevant;
• building code, safety or accessibility requirements that may affect reinstatement;
• shared services, plant, lifts, car parks and other common property assets;
• temporary works, escalation during the rebuilding period and other project-related cost factors.

The precise inclusions depend on the valuation scope, the policy wording and the property itself. Owners corporations should not assume that a purchase price, council valuation, developer estimate or previous insured amount is a reliable substitute for a current reinstatement assessment.

How sums insured affect strata insurance reviews

The strata insurance sum insured is the amount nominated in the policy for specified insured property. It is one of the most important figures considered at renewal because it can influence the level of cover available for a major property claim and may affect the premium.

A higher sum insured does not automatically mean a policy is suitable, and a lower sum insured does not necessarily mean a policy is poor. The question is whether the amount is supportable, current and aligned with what the policy is intended to cover.

When reviewing the sum insured, committees should consider:

• whether the figure is based on a recent professional valuation or another reliable method;
• whether the valuation covers all relevant common property and building components;
• whether recent works, additions or upgrades have been included;
• whether any policy sub-limits could restrict recovery for certain types of loss;
• whether the insurer has specific requirements for valuations or declared values;
• whether the sum insured remains appropriate after changes in construction costs or risk profile.

It is also important to distinguish between the main building sum insured and other policy limits. Public liability, office bearers liability, machinery breakdown, catastrophe extensions, loss of rent or temporary accommodation may each have separate terms, limits or exclusions depending on the policy.

What underinsurance can mean for a strata scheme

Strata underinsurance occurs when the insured amount is not enough to meet the cost of reinstating the insured property after a covered event. The consequences can be significant, particularly after a large fire, storm, flood or other major loss.

If a scheme is underinsured, owners may face delays, funding shortfalls, special levies, disputes or difficult decisions about the scope and timing of repairs. In some policies, underinsurance or average provisions may affect how a claim is settled if the property has not been insured for an adequate amount. The exact effect depends on the policy wording and the circumstances of the claim.

Underinsurance can arise for many reasons, including:

• using an old valuation without allowing for construction cost changes;
• insuring for market value instead of reinstatement cost;
• excluding common property assets that should have been considered;
• not updating the policy after building works or improvements;
• relying only on automatic indexation where actual costs have changed more quickly;
• choosing a lower insured amount to manage premium pressure without understanding the risk.

Premium affordability is a real issue for many schemes, but reducing cover without understanding the potential claim impact can create larger financial exposure for owners. Any decision about insured amounts should be documented and made with appropriate professional input where needed.

When should a strata insurance review happen?

Most schemes should review their strata insurance before each renewal, but renewal is not the only trigger. A review may also be needed whenever the property, legal environment or risk profile changes materially.

Some Australian jurisdictions have specific strata or community title insurance obligations, and some schemes may have requirements under their governing documents. For a broader jurisdictional overview, see Understanding State-by-State Insurance Requirements for Strata Schemes in Australia.

How often should a reinstatement valuation be obtained?

There is no single review timetable that suits every strata scheme. Valuation timing may be influenced by state or territory requirements, the size and complexity of the building, lender or insurer expectations, the age of the property, recent works and the owners corporation's risk tolerance.

As a practical approach, many committees consider a formal reinstatement valuation periodically and then review the insured amount each year at renewal. A complex high-rise building, mixed-use scheme, heritage property or building with specialist plant may require more frequent or detailed assessment than a small, simple scheme.

Between formal valuations, committees should be careful about relying only on automatic indexation. Indexation may help adjust a sum insured over time, but it may not fully reflect changes in building regulations, site conditions, materials, labour availability or upgrades to common property.

What to check during a strata insurance review

A useful review should go beyond comparing last year's premium with this year's premium. It should test whether the information given to the insurer is complete and whether the policy remains aligned with the scheme's actual exposure.

1. The basis of the insured amount

Ask when the last reinstatement valuation was completed, who prepared it and what it included. If the valuation is old, incomplete or does not cover all relevant parts of the scheme, the committee may need updated advice before renewal.

2. Property changes since the last renewal

Review whether there have been upgrades to lifts, roofing, fire systems, solar panels, security systems, pools, gyms, gardens, car parks, storage areas or other shared assets. Even relatively small works can matter if they affect replacement cost or risk.

3. Policy limits, sub-limits and exclusions

The main building sum insured is only one part of the policy. Committees should also check whether any sub-limits apply to flood, temporary accommodation, loss of rent, machinery breakdown, office bearers liability, legal defence costs or other sections. Cover varies by insurer and policy wording.

4. Excesses and claims history

Excess levels should be manageable for the scheme and understood by owners. A higher excess may reduce premium in some circumstances, but it may also affect how smaller claims are handled. Claims history can also influence renewal terms, so committees should maintain accurate claims records.

5. Disclosure and risk information

Insurers rely on information about the property when deciding whether to offer cover and on what terms. Building defects, combustible cladding, water ingress issues, commercial activities, short-term letting, unapproved works or unresolved maintenance issues may need to be disclosed depending on the circumstances and the insurer's questions.

Working with valuers, insurers and brokers

Different professionals play different roles in a strata insurance review. A valuer can help estimate reinstatement cost. An insurer assesses risk and issues policy terms. A broker may assist with market enquiries, policy comparison and explaining options, subject to their role and licensing obligations.

When seeking support, committees may wish to ask:

• Does the valuation focus on reinstatement cost for insurance purposes?
• What parts of the scheme are included or excluded from the valuation?
• How are demolition, professional fees and cost escalation treated?
• Are there known building issues that could affect insurer appetite or cover terms?
• How do policy sub-limits interact with the main sum insured?
• What information should be recorded in committee minutes for transparency?

Where professional assistance is needed, the Brokers page may be a useful starting point for understanding support options. Any insurance outcome, premium, cover availability or policy term will depend on the property, the insurer's criteria and the information provided.

Common mistakes to avoid

Strata insurance reviews can become rushed, especially when renewal notices arrive close to the expiry date. Allowing enough time can help avoid decisions based only on premium pressure or incomplete information.

Common mistakes include:

• Confusing market value with rebuild cost: the amount a property could sell for is not the same as the cost of reinstating the insured building.
• Ignoring common property upgrades: improvements to shared facilities may increase the reinstatement value.
• Assuming last year's sum insured is still adequate: construction costs and compliance requirements can change.
• Focusing only on premium: a cheaper quote may involve different limits, exclusions, excesses or assumptions.
• Leaving valuation questions until after renewal: if the insured amount is uncertain, the committee may not have enough time to make an informed decision.
• Not documenting decisions: clear records help owners understand why a sum insured, excess or policy option was selected.

How to approach the next renewal

A structured renewal process can help the committee manage both compliance and cost pressures. The following steps can provide a practical framework:

1. Locate the current policy schedule, certificate of currency, valuation report and claims history.
2. Confirm whether any state, territory or scheme-specific insurance obligations apply.
3. Check whether the reinstatement valuation is current and suitable for the property.
4. List any changes to the building, common property, occupancy or risk profile since the last renewal.
5. Review the sum insured, sub-limits, excesses, exclusions and optional covers.
6. Raise questions with the insurer, broker, strata manager or valuer before renewal terms are finalised.
7. Record the committee's reasoning and communicate relevant decisions to owners where appropriate.

If your scheme is preparing for renewal or wants to better understand available strata insurance options, you can review general information through Strata Cover Australia. The information you provide about valuations, sums insured and property changes can be important when making insurance enquiries.

Final thoughts

Keeping strata insurance up to date is about more than avoiding an expired policy. It is about making sure the cover reflects the building as it stands today, the cost of reinstating it if a major insured event occurs and the legal obligations that apply to the scheme.

A current reinstatement valuation, a supportable sum insured and a documented review process can help reduce underinsurance risk and improve the quality of renewal decisions. Because strata properties, insurer requirements and state-based obligations vary, committees should seek appropriate professional input where their circumstances require it.

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