Strata Insurance is cheap, so is it worth considering lower tier products?

The recently released National Strata Data Report published by UNSW gave us a few figures to help understand some values and costs of strata insurance.

They found the following:

·         2,587,397 lots are registered in Australia

·         These are registered in 316,227 schemes

·         The cost to replace these schemes totals $995,254,733,912

This means that the average scheme has around 8 lots and each of these lots is insured for around $385,000.

Bobby Lehane, CEO of CHU was quoted last year by Insurance Business Australia saying “I believe the market should be a billion dollar market, in terms of insurance premium.”

If we take the figure of $1B in premium and divide it by 2,587,397 lots, it turns out that our average unit owner is paying $386 per year in strata insurance.

If you guessed that was pretty cheap, you’d be right! The Senate’s ERC Report released last year understood that $668 per year was the average price for non-strata home insurance.

Strata insurance is seemingly at least 42% cheaper than non-strata home insurance which makes a fair bit of sense when you consider that there are many shared walls, roofs, driveways etc. along with the fact that client management is much easier and thus cheaper for a strata insurer.

The risk factors for unit owners are mostly the same as non-strata homeowners. Both a strata home and a non-strata home are still likely the largest asset of the owner and taking out an underwhelming strata policy carries a similar financial risk to taking out an underwhelming non-strata policy.

So, when we consider that the exposure to a unit owner is the same however the price is at least 42% cheaper, going for a lower tier product makes much less sense in strata as there is much less savings benefit compared with non-strata home insurance.

Sticking with high quality products for your strata insurance needs is likely the best move for most schemes.

But Simon, how do we know which policies are of high quality?!

Come with me into the warm confines of our Ratings page to see which insurers provide the highest quality policy that your scheme deserves.