Body Corporate properties can be challenging to insure due to shared ownership and complex building features.

A common issue is underinsurance, often caused by overlooked structural elements such as retaining walls, underground carparks, or foundations. Engaging a Quantity Surveyor to assess rebuild costs can help ensure these elements are properly accounted for, and the sum insured is more accurate.

Buildings with aluminium composite panels (ACP) may also face insurer scrutiny, as some materials are non-compliant or hard to insure.

Committees can face liability if their decisions lead to financial loss or inadequate cover. Older or previously remediated buildings may also have hidden defects that create uninsured risks if not properly disclosed.

Aluminium Composite Panels (ACP) spark worry after Grenfell. Real risk in New Zealand?

ACP explained: Two thin aluminium sheets bonded to a core material.

• Plastic (polyethylene) core: burns easily, melts, and drives fire straight up the building.

• Mineral-filled core: resists fire, slows or stops spread.

Old “fire-rated” labels ignored gaps behind panels and outside ignition sources. 2025 NZ Building Code changes (via C/VM2 and Practice Advisory 18) now require safer external walls.

How to check: Remove a small panel section and test the core, looks alone won’t confirm.

Most NZ city apartments aren’t Grenfell-style risks: concrete walls contain fires, sprinklers stop nearly all internal blazes, many buildings are spaced over 10 metres apart, and fire crews reach central business districts in about 7 minutes on average.

Smart checks beat panic.

Residential body corporates in New Zealand typically hold a package of insurance covers to protect the building, common property, unit owners, and the committee. These are the common covers and what each one does.

Material Damage (MD)

This is the core cover for the physical property — i.e. your buildings. The Unit Titles Act specifies that the body corporate is responsible for organising replacement insurance for the buildings to their full insurable value.

It covers accidental damage to the buildings — that is, damage that is sudden, unintended and unforeseen. There are also a range of important automatic coverages that should be considered, such as natural disaster, hidden gradual damage, contract works, landslip and subsidence, and illegal substances.

It will cover the buildings and sometimes common contents, up to a sum insured value. It is best that this is determined by a registered valuer or quantity surveyor, and quite often insurers require a valuation for larger properties completed in the last two years.

When it is needed
Every residential body corporate must insure the buildings and improvements to their full insurable value under the Unit Titles Act. MD is the foundation cover that meets this legal requirement.

Business Interruption (BI)

This covers the financial flow-on effects when units cannot be lived in after an insured event.
It typically includes loss of rents (for tenanted units) and alternative accommodation costs (for owner-occupiers) for a set period, plus additional increased costs of working and claims preparation expenses.

When it is needed
When residential units become uninhabitable due to damage covered under the Material Damage policy. It helps keep owners financially stable while repairs are carried out.

General Liability (GL)

Also called public liability.
It covers the body corporate’s legal liability for accidental personal injury or property damage suffered by third parties (visitors, contractors, neighbours, etc.) that arises from the ownership or management of the common property. Limits are usually standard and are typically $5,000,000 or $10,000,000 depending on the size of the property.

When it is needed
Any time people can access common areas. It protects the body corporate from claims for injury or damage that occurs on the property.

Statutory Liability (SL)

This covers fines, penalties and legal defence costs that arise from unintentional breaches of certain New Zealand statutes (for example health and safety, building, or resource management legislation).
The typical sum insured is $1,000,000.

When it is needed
Body corporates have ongoing legal obligations. SL protects against the financial consequences of an unintentional breach of those laws and is recommended on every residential body corporate.

Employers Liability (EL)

This covers the body corporate’s liability for personal injury to employees that is not covered by ACC, together with related defence costs.

When it is needed
Only if the body corporate employs staff (for example a building manager, caretaker or cleaner). If there are no employees, this cover is usually not required.

Officers & Board Liability (OBL)

Sometimes called Office Bearers or Committee Liability.
It protects committee members and office bearers against civil claims arising from their decisions or actions while managing the body corporate, and includes defence costs.
Typical sums insured are upwards of $1,000,000, sometimes more, particularly when the fee amount increases.

When it is needed
Recommended for every body corporate that has a committee. It safeguards the volunteers who serve on the committee from personal financial risk.

These six covers form the standard package for most residential body corporates. Exact limits, excesses and wordings vary between policies, so the body corporate should review the schedule and full policy wording each year.

The sum insured is the maximum amount your insurer will pay to reinstate the buildings and improvements after a major loss. Under the Unit Titles Act, every residential body corporate must insure the buildings and other improvements on the land to their full insurable value. Getting this figure right is one of the most important decisions a body corporate makes each year.

How to Come Up With a Building Value

The sum insured is not the market value of the units or what the complex would sell for. It is the estimated cost to fully rebuild or reinstate the buildings after a total loss.

A proper reinstatement valuation usually includes:

• Demolition and debris removal
• Current construction costs
• Professional fees (architects, engineers, consents)
• Compliance with today’s building standards
• An allowance for cost escalation during the rebuild period

The most reliable way to arrive at this figure is to engage a registered valuer or quantity surveyor experienced in insurance reinstatement valuations. Many body corporates update this valuation every one to two years, or whenever significant work or changes have occurred.

Why Most Insurers Require a Valuation

Insurers need a clear, independent figure so they can set the limit of their risk. For larger or more complex properties they almost always insist on a recent professional valuation (typically completed within the last two years).

Without a current valuation, insurers may decline to quote, apply higher excesses, or impose special conditions. A proper valuation also gives the body corporate confidence that the figure used is realistic and defensible if a claim arises.

The Importance of Getting the Value Right

If the sum insured is too low (underinsurance), the body corporate may not have enough money to fully rebuild after a major event. Owners could face significant shortfalls or difficult decisions about partial reinstatement.

If the sum insured is set too high, the body corporate simply pays more premium than necessary.

Getting the value right protects the body corporate’s legal obligation under the Unit Titles Act, reduces the risk of shortfalls, and gives unit owners greater certainty that the complex can be properly reinstated if the worst happens.

Review the sum insured carefully at each renewal and keep the valuation current. It is one of the simplest and most effective ways to protect the long-term interests of all owners.

An excess is the amount the body corporate must pay towards each claim before the insurer pays the balance. Excesses appear on almost every body corporate policy and can vary significantly depending on the type of claim and the risks present at the property.

How Excess Levels Affect Premiums

There is a direct relationship between the excess and the premium.

A higher excess means the body corporate takes on more of the cost of smaller claims. This reduces the insurer’s exposure, so the premium is usually lower.

A lower excess means the insurer pays more of every claim, which generally results in a higher premium.

Body corporates can sometimes choose a voluntary excess on top of the insurer’s standard excess to reduce the premium further. The key is finding a level the body corporate can realistically afford if a claim arises.

Why an Insurer May Impose an Excess

Insurers set excesses to manage risk and control the number of small claims.

Most policies have a standard excess that applies to general claims. In addition, insurers commonly apply higher specific excesses for certain types of loss or higher-risk situations. Common examples include:

• Water damage (often $2,500–$25,000 or more) — especially where there is a history of water ingress, weathertightness issues, or ongoing leaks
• Malicious damage — especially if there has been a history of theft or vandalism
• Unoccupied units
• Short-term tenancies
• Illegal substances damage
• Landslip or subsidence
• Natural disaster (frequently calculated as a percentage of the site value)

In the case of water damage, a higher excess is frequently imposed once an insurer becomes aware of existing water-related problems. This is a standard underwriting response to the increased likelihood of claims.

What to Do About Higher Excesses

Understand the reason
Ask your broker or insurer why a particular excess (especially a higher water damage excess) has been applied. Full disclosure of any known issues is essential — failure to disclose can lead to claims being declined.

Address the underlying risk
If a higher excess has been applied because of water ingress or maintenance issues, fixing the problem and providing evidence to the insurer can sometimes lead to a reduction in the excess at the next renewal.

Review options at renewal
Different insurers take different approaches to excesses. Comparing a few options can reveal more favourable terms, particularly on water damage excesses.

Check affordability
Higher excesses (such as $10,000 for water damage) need to be workable for the body corporate’s cash reserves. Factor this into budgeting and contingency planning.

Keep records
Maintain clear records of any risk improvements (repairs, inspections, maintenance) so these can be presented to underwriters when seeking better terms.

Excess levels are a normal part of body corporate insurance. Understanding why they are set at certain levels, and actively managing the risks that drive them, helps keep both premiums and claim costs under better control. Review the excess schedule carefully at every renewal.

Business Interruption for residential body corporates mainly responds when units become uninhabitable due to damage covered under the Material Damage policy. It covers the financial consequences for owners while the buildings are being repaired or rebuilt.

Alternative Accommodation

This cover is for owner-occupiers.

It pays the reasonable additional cost of temporary accommodation of a similar standard to the unit (for the owner and usually permanent family members living with them). Many policies also include boarding of domestic pets.

Cover applies while the unit remains uninhabitable because of insured damage.

Loss of Rental Cover (Loss of Rent)

This cover is for landlords of tenanted residential units.

It pays the rent the owner would have received if the unit had remained habitable. Calculation is normally based on the average rent received, or the amount in a signed tenancy agreement in place (or about to start) at the time of the damage.

For the same unit you generally claim either Alternative Accommodation or Loss of Rent — not both.

Why These Covers Are Important

Material Damage only pays to reinstate the physical building. It does not pay mortgages, body corporate levies, rates, or living costs while owners are displaced.

Without adequate BI cover:

• Owner-occupiers face large out-of-pocket housing costs.
• Landlords lose rental income but still have ongoing expenses.
• Financial pressure on owners can delay decisions or create disputes within the body corporate.

After a significant event (especially natural disaster), repair and rebuild timelines in New Zealand are often long. These covers protect cash flow and stability during that period.

What Is an Indemnity Period?

The indemnity period is the maximum length of time the insurer will pay Alternative Accommodation or Loss of Rent after the damage occurs.

It is selected at placement or renewal and is usually expressed in months (commonly 12, 24 or 36 months). Once the indemnity period ends, payments stop — even if the unit is still uninhabitable.

For natural disaster claims, the ideal indemnity period is 24 months. This provides a more realistic timeframe for demolition, redesign, consents and reconstruction following a major event.

What Should the Sums Insured Be?

For residential body corporates, both Alternative Accommodation and Loss of Rent should be set at upwards of $75,000 per unit per year.

This level of cover better reflects current temporary accommodation costs and rental values, and reduces the risk of owners facing significant shortfalls during a prolonged displacement.

Claims Preparation Costs

This cover pays for the professional costs of preparing and presenting a claim (for example accountants, quantity surveyors, loss adjusters or other specialists engaged by the body corporate).

Recommended limit: $10,000–$50,000.

It ensures the body corporate can properly document and support complex claims without the cost coming out of owners’ pockets.

Additional Costs (Increased Cost of Working)

This cover pays for extra expenses reasonably and necessarily incurred to minimise the interruption or to continue essential operations after damage (for example temporary facilities, expediting costs, or additional project management).

Recommended limit: $100,000–$200,000.

It gives the body corporate flexibility to take practical steps that reduce the overall length or severity of the interruption.

NHI Cover (Natural Hazards Insurance / NHCover)

What Is NHI Cover?

NHI Cover (also called NHCover) is the government-backed first layer of insurance for residential buildings and associated residential land in New Zealand. It is provided by the Natural Hazards Commission Toka Tū Ake (formerly the Earthquake Commission / EQC).

It covers damage caused by:

• Earthquake
• Landslide
• Volcanic activity
• Hydrothermal activity
• Tsunami
• Natural hazard fire (fire resulting from any of the above)

It also provides limited cover for residential land damage from storms and floods.

Key points for body corporates:

• Cover applies on a per dwelling basis.
• The maximum building cover is generally $300,000 + GST per dwelling per natural hazard event.
• The private insurer (under the body corporate Material Damage policy) responds above this NHI limit, up to the full sum insured.
• The building excess is $500 per insured dwelling. The land excess is also $500 per insured dwelling, capped at $5,000 for buildings with more than 10 insured dwellings.

NHI Cover is automatic when a residential building has fire insurance. Body corporates do not need to arrange it separately.

How Much Does It Cost?

NHI Cover is funded by the Natural Hazards Insurance (NHI) levy, which is collected by the private insurer as part of the overall premium and passed to the Natural Hazards Commission.

Current levy rate:

• 16 cents per $100 of the building cover cap
• Maximum of $480 + GST per dwelling per year

For a body corporate, the total NHI levy is calculated by multiplying the applicable per-dwelling levy by the number of insured dwellings in the complex.

This levy appears as a separate line item (or is clearly identifiable) within the body corporate insurance premium.

Why Insurers Consider This a Material Fact

Insurers treat social housing (or community housing) occupancy as a material fact because it changes the risk profile of the building compared with standard private residential tenancies or owner-occupied units.

Key reasons include higher perceived frequency of claims for malicious or intentional damage, vandalism, theft and water damage, more complex tenancy management arrangements, and greater difficulty meeting standard policy conditions (particularly around inspections and illegal substances cover).

This occupancy should always be fully disclosed. Failure to disclose social housing can affect claim entitlement or allow the insurer other remedies, including avoidance of the policy in some circumstances.

Risk Spectrum

Not all social housing is viewed the same way:

Higher risk — Transitional or emergency housing, short-term placements, high-turnover tenancies, or arrangements with limited on-site management and poor inspection regimes.

Lower risk — Longer-term social housing managed by a professional, registered Community Housing Provider (CHP) with clear tenant selection processes, regular inspections, active property management, and a demonstrated commitment to maintaining the building.

How to Make Insurers More Comfortable With the Risk

Insurers respond far more favourably when the body corporate can demonstrate that the social housing is professionally managed rather than unmanaged or high-risk.

Practical steps that improve the risk profile include:

• Engage directly with the Community Housing Provider — visit the site, interview the on-site manager, and obtain clear information about their operations, tenant selection, inspection frequency, and approach to behavioural issues.
• Document and present the management practices in the underwriting submission (inspection schedules, maintenance processes, incident reporting, and CHP credentials).
• Offer a higher excess specifically on the social housing units (commonly $5,000).
• Maintain high standards of building maintenance, security, and common-area upkeep.
• Be completely transparent about the number of social housing units, the nature of the tenancies, and the claims history.

A well-managed, longer-term community housing arrangement with a professional CHP can usually be underwritten successfully. Poorly managed, high-turnover, or undisclosed social housing is significantly harder (and often more expensive) to place.

Typical Underwriting Conditions

It is common for insurers to apply underwriting conditions where social housing is present. Typical conditions include:

• A higher excess specifically on social housing units (commonly $5,000, compared with a standard $1,000 excess on other units).
• An elevated excess for malicious or intentional damage (often $10,000).
• Strict requirements around regular unit inspections, particularly if illegal substances (meth) cover is to remain available.
• Conditions relating to unoccupied units (for example fortnightly checks, securing the property, and a separate higher excess).
• Restrictions or higher excesses if any units are used for short-term or transitional housing.
• Warranties requiring the Community Housing Provider to maintain certain management standards (inspections, tenant referencing, and prompt reporting of issues).

These conditions are designed to reflect the increased risk while still allowing cover to be offered. The more professionally the social housing is managed and the more transparent the disclosure, the more flexible insurers tend to be with the severity of these conditions.

Accidental Damage is the primary cover under a body corporate Material Damage policy. It responds when the buildings and improvements suffer physical damage caused by an accident.

Explanation of “Sudden”

Most policies define an accident as something that is sudden, unexpected and unforeseen.

“Sudden” is critical. The damage must occur at a clear point in time rather than developing slowly over weeks, months or years. If the cause is ongoing or progressive, it will usually fall outside the accidental damage definition.

What Kind of Events Are Typically Covered

Subject to the policy wording and any excesses, Accidental Damage generally responds to sudden events such as:

• Fire and explosion
• Storm, wind and rainwater
• Flood
• Earthquake and volcanic activity (above the NHI limit)
• Impact (vehicles, trees, aircraft)
• Malicious damage by third parties
• Escape of water from pipes, tanks or appliances (when sudden)
• Accidental impact or collision

What Is Typically Excluded — Gradual Damage and Maintenance

Insurance policies do not cover everything. They are not designed to pay for normal maintenance, wear and tear, or problems that develop over time.

Damage that occurs gradually is almost always excluded. Common examples include:

• Mould and fungal growth arising from ongoing moisture or long-term leaks
• Deterioration, wear and tear, corrosion, rust or gradual weathering
• Subsidence, landslip or ground movement (unless specifically extended)
• Progressive structural movement or settlement
• Damage caused by poor or deferred maintenance

These exclusions exist because insurers expect body corporates to maintain the buildings properly. Issues that should have been addressed through regular maintenance will not be covered.

Important Extensions That Can Make a Difference

A basic Accidental Damage wording can leave significant gaps. The following extensions are particularly valuable for body corporates:

• Hidden gradual damage — Limited cover for water damage that has been occurring unseen (subject to strict conditions and often a lower sub-limit)
• Landslip and subsidence — Extension that can bring limited cover for ground movement that would otherwise be excluded
• Contract works — Cover for alterations or renovations being carried out on the complex
• Illegal substances / meth contamination — Cover for decontamination costs (usually subject to inspection warranties)

These extensions can significantly improve the practical protection available after a claim and should be reviewed carefully at each renewal.

What Does It Cover?

Hidden Gradual Damage is an important extension to the main Accidental Damage cover.

It provides limited protection for water damage that has been occurring gradually and out of sight (for example, a slow leak inside a wall, under a floor, or in a ceiling cavity) that would otherwise be excluded because it is not “sudden”.

This is one of the most common types of claim in residential body corporates. Slow leaks from bathrooms, kitchens, roofs or plumbing often go unnoticed until significant damage has already occurred.

The cover is designed to respond when the damage is discovered and is still relatively contained. It does not turn the policy into a maintenance or long-term leak policy — the damage must still meet the policy’s definition of hidden gradual damage, and strict conditions usually apply (including prompt notification once the damage is found).

Typical Insured Limits

Most standard body corporate policies only offer very modest limits for this extension — often around $10,000 per year.

For residential body corporates, more appropriate limits are:

• $25,000–$50,000 per event
• An annual aggregate limit of $50,000–$100,000

These higher limits give the body corporate more realistic protection when a hidden leak is discovered, while still recognising that this remains a restricted form of cover rather than full gradual damage insurance.

It is worth checking the exact sub-limit and any conditions (such as discovery requirements or exclusions for mould) at each renewal, as wordings and limits vary between insurers.

At CIX, we design purpose-built policies specifically for Body Corporate entities, ensuring that coverage aligns precisely with the ownership and governance structures defined under the Unit Titles Act.

Our approach leverages council property data and cladding assessments to accurately identify and evaluate any ACP or non-compliant materials, helping insurers price and underwrite these risks with confidence.

We include liability protection for committee members and decision makers, safeguarding them against potential claims arising from management or insurance decisions.

To maintain accuracy and avoid underinsurance, we coordinate independent rebuild valuations and review long-term maintenance plans (LTMPs) to identify and mitigate defect-related risks.

Finally, CIX places a strong emphasis on transparency and communication, providing clear premium breakdowns and digital tools that help committees explain coverage and renewal changes effectively to all unit owners.