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Everything you need to know about body corporate insurance

Rising governance failures in sectional title schemes are exposing body corporates and property owners to growing insurance risks. PSG Insure’s Ryno de Kock explains why body corporate insurance, proper valuations, maintenance planning and specialist advice are essential to protecting schemes against financial loss and regulatory exposure.
Written by
Ryno de Kock
Published on
May 25, 2026
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There is growing evidence of governance failures by body corporate trustees, with disputes referred to the Community Schemes Ombud Service (CSOS) rising for a second consecutive year. CSOS recorded 16 791 new dispute applications in the 2024/25 financial year, up from 15 587 the year before, a 7.7% increase, with financial and administrative complaints consistently among the most common matters lodged.

Trustee mismanagement can have serious consequences, including lapses in maintenance planning, poor oversight of service providers and, critically, inadequate building insurance or underinsurance, leaving body corporates, and individual owners, financially exposed when they need to claim.  

What is body corporate insurance and why is it not optional? - Body corporate insurance, often referred to as sectional title insurance, is the insurance arranged by a body corporate to protect the buildings and common property within a sectional title scheme, as well as the scheme’s financial interests.

The Sectional Titles Schemes Management Act (STSMA) sets out a baseline of prescribed risks that schemes must insure against, including perils such as fire, extreme weather events, civil unrest and certain water-related incidents. In addition, schemes are required to carry public liability insurance and cover against the loss of scheme funds arising from fraud or dishonesty. Schemes may then add additional risks by special resolution depending on the needs and risk profile of the property.

This insurance essentially allows a body corporate to recover after a major loss without having to shift costs onto individual owners through special levies. However, if the insured value is wrong, liability limits are inadequate or there are gaps in cover, the shortfall can still land on owners, often when they can least afford it.

What is, and isn’t, covered? - While every policy is different, body corporate building insurance is designed to cover costs related to the physical structure of, and any required improvements to, common property. In simple terms, it focuses on the elements that all owners have a shared interest in protecting, such as gardens, garages and recreational facilities like complex swimming pools.

Where owners often get caught out is assuming that the body corporate policy extends to internal fixtures and personal belongings. Under most standard policies, owners typically still need their own insurance for home contents and personal liability for incidents inside their unit.

Body corporates are also required to take out public liability insurance, which covers the risk of liability to pay compensation in respect of any bodily injury, illness or death of a person, or damage to or loss of property, occurring on or in connection with the common property. The STSMA prescribes a minimum public liability limit of R10 million in any one claim and in total for any one period of insurance, highlighting the potential scale of exposure if this cover is inadequate.

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Maintenance planning and insurance should never be treated as separate governance issues.

Ryno de Kock
Head of Distribution at PSG Insure

Another common area of confusion is maintenance. Insurance is designed for sudden, unforeseen events; not wear and tear or damage arising from poor upkeep. Where maintenance has been neglected, claims can be disputed or reduced. This is why maintenance planning and insurance should never be treated as separate governance issues.

The risk of trustee mismanagement - Trustees play a central role when it comes to a scheme’s insurance. Not only do they help appoint advisers and approve cover, but they also have to ensure the scheme is insured in line with the STSMA, that premiums are paid, that mandatory covers such as public liability and fidelity guarantee insurance are in place and that replacement values remain accurate.

When trustees mismanage a scheme, insurance risk can arise through:

  • Underinsurance due to outdated replacement values - The STSMA requires insurance to replacement value, and these replacement valuations should be done periodically and presented to members. As with any other type of insurance, sectional title policies should be reassessed and updated annually. Section owners are advised to check at the body corporate’s AGM that valuations have been reviewed to account for inflation, rising building costs and improvements to common property or individual units. While many specialist sectional title insurers offer complimentary valuations for new policies, these should be revisited every three years. If valuations lag inflation, owners may only discover the gap after a major loss.
  • Cover that doesn’t match the scheme’s risk profile - The regulations set minimum risks, but different properties have different levels of exposure. Where trustees don’t understand what should be insured, or fail to act on specialist advice, exclusions and inadequate extensions can result in costly consequences.
  • Fraud and governance exposure - In more serious cases, weak oversight and controls increase the risk of financial mismanagement. This is why Regulation 15 of the CSOS Act requires all body corporates to insure against the loss of money belonging to the scheme arising from fraud or dishonesty by any insurable person. It is now compulsory for all community schemes to have fidelity guarantee insurance in place so they are covered if scheme funds are lost through theft or fraud committed by a scheme executive or managing agent.

The importance of specialist advice - Body corporate insurance can be complicated and must align with statutory requirements, which is why specialist guidance is so important. A qualified insurance adviser is therefore critical to help trustees translate legal duties into workable protection, ensuring body corporates have appropriate cover so that individual owners avoid costly gaps.  

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