Is joint insurance a good idea?

Question: I have just bought a property in an apartment block in Dubai Marina and I am looking at getting building insurance. However I have been told by one of my neighbours that under a new law I have to join a Home Owners Association which may organise a joint building insurance policy for all the apartments in the block. Can you explain how this new law works and whether it's better for me to pay into a joint policy or to secure my own coverage?

Answer: Building insurance is something that should be top of everyone's list when buying or renting a property in the UAE. However, at present this is not the case, with estimates suggesting that up to 70 per cent of buildings in the country which are more than ten years old are uninsured and an even larger proportion are under-insured.

However, all this may change with the introduction of a new law, first issued in Dubai on December 31, 2007 but only now being implemented, which essentially transfers the responsibility for maintenance and upkeep of all properties from the developer to occupiers. The law is called the Strata Title Law and regulates the management of common property in strata developments by providing a body corporate which will own the freehold to the common property and manage areas for the benefit of occupiers.

The law represents a large shift in the onus of responsibility on the management of properties, with the law stipulating that the body corporate must oversee the day-to-day management of all jointly-owned properties. Under the law all involved parties automatically become members of an association with its own elected board of decision-makers.

It is the responsibility of the body corporate, which could be in the guise of a Home Owners Association, to adequately protect the interests of owners, tenants and other occupiers. The insurance which is required must cover damage from fire, storm, tempest, explosion, other prescribed risks including replacement costs, costs of professional advisors and removal of debris.

Some insurance firms have already developed specific products to help occupants meet the regulations set out in the law.

Such products provide single and common cover for the whole building and include not just building insurance, but also third party insurance, office bearers' liability insurance, fidelity guarantee insurance and machinery breakdown insurance.

Cost of joint policy

The cost of a joint policy would presumably be split between each occupant in the development. However, a word of warning about under insurance. One may feel it's simpler to go down the route of joint building insurance policy but you must still ensure that the cover secured is sufficient.

Many people fall into the trap of under insurance in a bid to keep costs low, so one much check for a start that the policy is based on the new 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.

There may be disagreements within the association as to the correct level of cover required, so seeking input from an independent financial advisor may be a wise move. You may need to top up the joint-cover to adequately protect your own premises and an adviser can help you with this. Insuring home contents is also a wise move.

- The writer is Director General Insurance, Nexus Insurance Brokers LLC. Opinion expressed here are the writer's own and do not reflect that of Gulf News. If you have any question, please email it to: advice@gulfnews.com