Dubai: Apart from collecting service charge arrears and putting sinking funds in place, owner associations (OAs) will also need to insure buildings for their ‘full replacement value' under the Jointly Owned Property Regulations.
Experts in the insurance industry, however, claim that the majority of the buildings in Dubai are under-insured or uninsured completely.
"Estimates suggest that up to 70 per cent of buildings in the UAE that are more than ten years old are perhaps uninsured, and an even larger proportion under-insured," says Rumi M Sanjana, director, general insurance, Nexus Insurance Brokers.
The lack of insurance penetration in the country can be attributed to how the UAE is viewed as a relatively safe place in terms of natural disasters. "In the UAE, it is only when some catastrophic disaster happens, such as a fire in an apartment block, that the general public becomes aware of the real danger of living in an uninsured or under-insured property," Sanjana adds.
Local insurance firms have now tailormade strata insurance plans to cover the specific exposures and risks unique to OAs.
"Strata insurance plans are designed not just to meet but to go beyond the minimum legal requirements just introduced in Dubai. These specialist plans specifically protect the assets unique to owners who, as members of the OA, have a joint and several unlimited liability for any financial shortfall that may occur with their common assets. Strata insurance plans are full ‘accidental damage' policies, designed to protect against a wide range of risks for owners and their newly formed OAs," says David Ellis, general manager — CHU, at Orient Insurance.
While the number of standard property insurance policies is expected to decline as more owners take up specialist strata insurance plans, experts warn OAs against under-insuring buildings as part of a cost-cutting exercise.
"The key to ensuring adequate insurance is making sure that the policy covers the ‘full replacement value' of the property rather than just the ‘market value'. In this way, if a building is damaged, then the insurance will pay for the cost of rebuilding the property and replacing all the permanent fixtures and contents," Ellis adds.
While a strata insurance plan will only cover contents owned by the OA, experts suggest the need to insure home contents and personal belongings as well. "Possessions such as electronic goods, furniture, books and CDs can all be expensive to replace, so the policy needs to be an accurate assessment of the true value of the items," suggests Sanjana.
