A body corporate does not get to decide whether the building is insured, and it does not get to decide what standard that cover meets either. Queensland legislation sets both. The building has to be insured for its full replacement value, and that value has to rest on more than a renewal notice carried forward from the year before. For a committee signing off the policy each year, meeting that standard is a legal obligation, not a matter of preference.

Most owners never read the insurance clause in the body corporate legislation and have no reason to. They notice the levy. What sits behind that levy, and behind the figure the scheme is insured for, is a statutory scheme with its own rules about who insures what, how the sum insured is set, and how often it has to be checked against an independent insurance valuation rather than an index.

The statutory duty to insure

The Body Corporate and Community Management Act 1997 (Qld) requires a body corporate to insure the building for its full replacement value, and the regulation modules made under the Act fill in the detail for different scheme types. A body corporate cannot elect to under-insure to save on premiums, cannot let the sum insured sit unreviewed for years, and cannot treat the requirement as satisfied because a policy happens to be in place. The obligation is to insure for the right amount, not merely to hold a policy.

That distinction matters after a loss. An underinsured scheme discovers the gap at the worst possible moment, when a claim is capped at a sum insured that was never enough to rebuild what was lost, and the shortfall has to be found from a special levy raised across every lot owner at once.

Full replacement value, not market value

Full replacement value means what it costs to rebuild the insured improvements, not what the property would sell for. The two figures are built from different evidence and rarely land close together, a distinction covered in more depth in how insurance valuations and replacement cost differ from market value. For a scheme the point still bears repeating, because it is the most common source of confusion at renewal time. Land is not insured, because land does not burn, and in most Brisbane schemes the land under the building carries a meaningful share of what the lots would sell for as a whole. A sum insured pitched off a sales appraisal or a bank valuation of the complex measures the wrong thing entirely.

What the cover has to reflect is the cost of putting the building back, on the same site, to current standards, if every insured improvement were lost tomorrow.

What the assessment has to cover

A proper reinstatement assessment for a scheme is not a builder’s estimate for a similar looking new building. A total loss sets a sequence of costs in motion well before construction starts, and a defensible sum insured carries all of them.

  • Demolition and debris removal. Making the site safe, demolishing what remains, and removing and disposing of the debris, including any hazardous material in an older building.
  • Reinstatement of common property. Not just the building envelope. Lifts, fire services, pool plant, driveways, retaining walls, boundary fencing, shared landscaping and car park structures all sit inside the scope, and schemes routinely under-value them because attention goes to the building and not the grounds around it.
  • Professional and statutory fees. Design, engineering, certification and authority charges, all incurred before a slab is poured and easy to leave out of a rough figure.
  • Compliance with current standards. A rebuild has to meet the codes in force at the time of rebuilding, not the ones that applied when the original went up, which is rarely a like for like exercise on an older building.
  • Escalation over the rebuild period. Cost movement across the policy period and the months of design, approval and construction that follow, and longer again where a single event has damaged buildings across a whole region at once.

Leaving any one of these out understates the figure, and on a multi-storey scheme with shared plant and structured car parking, the gap between a rough estimate and a properly assessed figure can be substantial.

The five yearly valuation cycle

Queensland’s regulation modules do not allow a scheme to set a sum insured once and index it forever. A body corporate is required to obtain a written insurance valuation of the buildings it insures at intervals of no more than five years, prepared by a valuer independent of the body corporate, so the figure the scheme relies on rests on a professional assessment rather than an internal estimate carried forward year after year.

Indexation between valuations is normal practice and generally accepted as reasonable in the years the figure is not formally reassessed. What it cannot do is substitute for the valuation itself, because an index tracks general cost movement and says nothing about what has actually changed on this particular site: a completed capital works program, an added level, a new pool, or construction costs in Brisbane moving at a different pace to the index applied. A scheme relying on an old figure indexed forward for a decade is not meeting the statutory standard, whatever the renewal notice says.

Building format and standard format schemes insure differently

What the body corporate is required to insure depends on how the scheme is set out on its plan, a distinction that also shapes how units and townhouses are valued. In a building format plan, common in apartment buildings, the lot boundaries follow the structural elements of the building, and the body corporate insures the building as a whole, structure and all, because there is no other party positioned to do it. In a standard format plan, common where lots are freestanding houses or townhouses on their own parcels of land, the body corporate’s insurance obligation is generally confined to common property, and the owner of each lot commonly carries the building insurance on their own dwelling, though scheme by-laws can shift that arrangement.

Getting this wrong leaves a gap nobody notices until a claim is made. An owner who assumes the body corporate covers their dwelling in a standard format scheme, or a committee that assumes it does not need to insure structures sitting on common property in a building format scheme, both discover the mistake after the loss rather than before it. Confirming which model applies, and reading it against what the current policy schedule actually covers, is worth doing before renewal rather than after an event.

The committee’s duty

Day to day, the insurance obligation is carried out by the committee on the body corporate’s behalf. That means obtaining quotes, presenting the policy for renewal, and arranging the periodic valuation when it falls due, generally well ahead of the renewal so the figure is ready rather than rushed. It is a compliance task with real consequences attached. A committee that lets a valuation lapse, or renews cover on a figure known to be stale, is not meeting the standard the legislation sets, and an owner or the body corporate itself can raise that failure through the dispute resolution process the Act provides.

None of this asks a committee to become expert in construction costs. It asks the committee to commission the assessment on schedule, from a valuer independent of the scheme, and to put the resulting figure to the insurer rather than a guess. Reviews should also be brought forward outside the five year cycle whenever something changes the building materially: a completed renovation or capital works project, a new structure added to common property, or a period of sharp movement in construction costs of the kind Queensland has seen more than once in recent years. Waiting for the scheduled date in those circumstances leaves the scheme under-insured in the interval, which is exactly the exposure the valuation requirement exists to close.

A sum insured is only as good as the assessment behind it, and for a body corporate that assessment is not discretionary. It is a periodic, independent obligation the legislation imposes precisely because renewal notices and rough estimates have a habit of drifting from what a building would actually cost to rebuild. Getting the figure right protects every owner in the scheme equally, which is more than most items on a body corporate agenda can claim.