Sectional Title Insurance: Why Trustees Must Reassess Cover Every Year

In every sectional title scheme, trustees have a legal responsibility to ensure the scheme is adequately insured. This review should be conducted annually and is typically tabled as an agenda item at the Annual General Meeting (AGM), as required by the Sectional Title Schemes Management Act (STSMA) [Section 17(7)(j)].

Insurance cover for a sectional title scheme is not optional—it is a legal requirement.

The STSMA, particularly Section 23, outlines what must be insured, which includes:

• Buildings within the scheme

• Public liability cover

• Fidelity cover

• South African Special Risks Insurance Association (SASRIA) cover

• How insurance excesses are managed

Importantly, the law requires that insurance must cover the full replacement value of all units, with each unit’s value listed separately.

Why Annual Insurance Reviews Are Essential

Over time, market values change, and owners may renovate or upgrade their units. These changes can increase the replacement value of a unit, and without updating the insurance schedule, those improvements may not be fully covered.

In most schemes, the body corporate insures each unit according to its participation quota. However, any additional cover needed for unit upgrades or improvements is generally for the owner’s account.

How to Calculate the Correct Replacement Value

Accurately determining a sectional title scheme’s insurance replacement value involves more than simply adding up the units’ worth. A professional valuation schedule should be prepared, covering:

• Replacement value of each unit (including upgrades and improvements)

• Garages, parking bays, and storerooms

• Communal areas such as gardens, paved areas, walls, foyers, stairwells, lifts, and swimming pools

• Shared facilities such as a clubhouse, gym, or laundry room

• Professional fees

• Demolition costs and VAT

• Possible redesign and reconstruction costs

Given the complexity, trustees should consider engaging a professional valuer and working with a specialist sectional title insurance broker to ensure compliance and accuracy.

Documenting and Communicating Insurance Decisions

Once the trustees have received the replacement value, the decision should be recorded in the AGM minutes. The chairperson should clearly explain how the figure was determined and confirm that the majority of owners agree. This helps prevent misunderstandings or disputes in the future.

Staying Aligned with Market Values

A full professional valuation is required every three years, but annual adjustments for inflation are essential to ensure the policy remains in line with current market-related replacement values.

MONO.insure Brokers’ Advice to Trustees

Reassessing sectional title insurance each year doesn’t have to be complicated.

With the right guidance and professional input, trustees can ensure that the scheme’s assets are properly protected, that the insurance complies with legislation, and that owners have peace of mind knowing their investments are safeguarded.