Different types of insurance in a body corporate
Risk management for community schemes in South Africa
30 September 2025 | Nicole Nel
The importance of insurance
Insurance is arguably one of the most important aspects within a sectional title scheme, but, unfortunately, often only becomes relevant when something goes wrong.
Too many times, an owner attempts to put in a claim with the body corporate’s insurance provider, only to have this claim rejected, because either the event that occurred was not insurable, i.e. it was not a sudden or unforeseen event, or this event was never accounted for in terms of the body corporate’s insurance policy in the first place, i.e. loss of rental claims.
In this article, I will be highlighting the 3 different types of insurance that a body corporate is required to have, and comply with, in accordance with the Sectional Titles Schemes Management Act 8 of 2011 (“the STSMA”), as well as explaining when an owner would be responsible for any additional insurance for their section and/or exclusive use area, over and above the insurance cover required for the body corporate as a whole.
What is one of the main function of the body corporate?
Section 3(1)(h) of the STSMA provides that one of the main functions of the body corporate is to insure the building or buildings and keep it or them insured to the replacement value thereof against fire and such other risks as may be prescribed. Section 3(1)(i) of the STSMA notes further that the body corporate may, by special resolution of the members, insure against additional risks outside of those already prescribed.
In terms of the above, section 3(1)(h) of the STSMA specifically makes reference to, “insured to the replacement value.” This replacement value, quite literally, refers to the value of each section and exclusive use area in the event that they had to be totally replaced as a result of an insurable risk, i.e. fire, earthquake, etc.
What are insurable risks?
These insurable risks are as per Regulation 3(1) of the Regulations to the STSMA, and include:
lightning, explosion and smoke;
riot, civil commotion, strikes, lock-outs, labour disturbances or malicious persons acting on behalf of or in connection with any political organisation;
storm, tempest, windstorm, hail and flood;
earthquake and subsidence;
water escape, including bursting or overflowing of water tanks, apparatus or pipes;
impact by aircraft and vehicles, and
housebreaking or any attempt thereat.
How often should replacement valuations take place?
In order to maintain accurate replacement values, Prescribed Management Rule (“PMR”) 23(3) of the STSMA provides that the body corporate must obtain a replacement valuation of all buildings and improvements that it must insure at least every 3 years and present such replacement valuation to the members at the relevant annual general meeting following the receipt of the valuation.
Furthermore, at every general meeting, the members must be presented with the proposed estimates of the body corporate’s insurance schedules outlining the replacement value of the building/s and all improvements to the common property, and the replacement value of each unit, which, in accordance with PMR 17(6)(j)(ii) of the STSMA, they will need to approve by ordinary resolution.
It must be highlighted that any member may at any time by written notice to the body corporate require that the replacement value specified for that member’s unit or exclusive use area be increased.
Notwithstanding the fact that the body corporate as a whole is responsible for the insurance of the building as a whole, in accordance with the above, it must be highlighted that a member (owner) is responsible for the payment of any additional premium payable as a result of that member’s written request to the body corporate to increase their section and/or exclusive use area’s replacement value, as outlined above.
Furthermore, an owner will also be held liable for the payment of any excess amount/s that relate/s to damage to any part of the buildings that member is obliged to repair and maintain in terms of the STSMA or the PMR, and must furnish the body corporate with written proof from the insurer of payment of that amount within 7 days of written request.
What other types of insurance is the body corporate required to have?
Besides the insurance required for the possible replacement of the building of the scheme, including the replacement of any common property, sections or exclusive use areas, the body corporate is also required to have public liability insurance, and fidelity insurance.
PMR 23(6) of the STSMA provides that a body corporate must take out public liability insurance to cover the risk of any liability it may incur, and to pay compensation in respect of any bodily injury to, or death or illness of a person on or in connection with the common property, and any damage to or loss of property that is sustained as a result of an occurrence or happening in connection with the common property, for an amount determined by members in general meeting.
What is the minimum amount for public liability?
It must be noted that the current minimum amount for public liability insurance for bodies corporate, as prescribed by the Minister of Human Settlements, is R10 000 000.00, for any 1 claim and in total for any 1 period of insurance, but, as aforementioned, the members of the body corporate may resolve that this is set at a higher amount.
What is fidelity insurance?
Fidelity insurance, as per PMR 23(7) of the STSMA, refers to insurance which covers the risk of loss of funds belonging to the body corporate or for which it is responsible, sustained as a result of any act of fraud or dishonesty committed by a trustee, managing agent, employee or other agent of the body corporate.
The Regulations to the CSOS Act 9 of 2011 (“CSOS Act”), note that the minimum amount of fidelity insurance of the body corporate must be to the value of the body corporate’s investments and reserves at the end of its last financial year, and, at least, 25% of the body corporate’s operational budget for its current financial year.
What resolution is required for insurance for additional risks?
Notwithstanding the 3 types of insurance as outlined above, a body corporate can also insure against additional risks that have not been provided for in terms of legislation. This is done by way of special resolution of the members, in accordance with section 3(1)(i) and PMR 23(8) of the STSMA.
Conclusion | Members can insure against additional risks
We hope that this article highlighted the different types of insurance that a body corporate is required to have in terms of sectional title legislation, explained the liability that members remain responsible for in the event of an insurable event, and outlined that members have the power to insure against additional risks not already provided for in legislation, but that same must first be authorised by way of special resolution.
If you would like any additional information on the above, please contact info@tvdmconsultants.com today.
About Nicole Nel
Nicole Nel is a Community Schemes Consultant at TVDM Consultants.
Nicole joined our team at the start of 2021 after finishing up her LLB at Stellenbosch University, where in the final year of her degree, Nicole worked as a research intern for the South African Research Chair in Property Law (“SARCPL”), where her research contributed towards various Property Law Juta publications. After graduating, she went on to complete an Advanced Diploma in Corporate and Securities Law through UNISA with distinction.
Nicole recently completed the SA Legal Academy mediation course, and is an Accredited Mediator. Nicole is also a member of Golden Key, international honours society as a top academic achiever in her respective fields of study.
Click here to learn more about her.
