Common Claims in Sectional Title Insurance, and How to Avoid Them

In South Africa, community living is increasingly governed by shared property ownership models such as sectional title schemes and Homeowners Associations (HOAs). While these offer structure and shared responsibility, they also require an understanding of different types of insurance, each with distinct roles, responsibilities, and legal implications.

Let’s start by demystifying the types of insurance involved in community scheme living.

Understanding the Differences: Sectional Title Insurance, Fidelity Insurance and Homeowners Association Insurance

Sectional Title Insurance is arranged by a body corporate to insure the buildings and common property in a sectional title scheme. It includes public liability cover and protects communal structural assets. “Body Corporate Insurance” is simply another term often used to describe sectional title insurance, focusing on the obligations of the body corporate under the law.

Fidelity Insurance Cover is legally required under the Sectional Titles Schemes Management Act (STSMA). It protects the scheme’s funds from theft or fraud by trustees, staff, or managing agents.

Homeowners Association (HOA) Insurance covers the shared infrastructure and common property within a residential development, such as roads, perimeter walls, gardens, and communal facilities like clubhouses and security systems. Unlike sectional title schemes—where the body corporate insures the entire property—individual homeowners in HOAs are responsible for insuring their own homes and contents. The HOA, meanwhile, must ensure its collective assets are adequately protected. A comprehensive HOA insurance policy should include public liability, trustees’ liability, and cover for damage caused by storms, theft, or vandalism to maintain legal compliance and safeguard the community.

Who Else Needs This Type of Cover?                                   

While trustees and unit owners are the most directly involved, other key stakeholders also need a solid understanding of community scheme insurance:

These policies don’t just affect trustees and residents — property managers and investors should also understand the scope and exclusions of community scheme insurance to avoid compliance risks and financial exposure.

For more on how these policies function together, see our Comprehensive Guide to Sectional Title Insurance.

Top Claims Under Insurance for Sectional Titles

Geyser Failures

Based on the most recent data available for 2024, geyser-related issues remain the predominant cause of insurance claims in South African sectional title schemes. According to Addsure, a leading specialist in sectional title insurance, approximately 70% of all claims are geyser-related. These claims include both the cost of replacing the geyser and the damage caused to ceilings, walls, flooring, and electrical systems.

This highlights just how crucial regular geyser maintenance and timely replacements are. Trustees and managing agents who schedule routine inspections can drastically reduce claim frequency, protect the community’s insurance standing, and minimise financial disruptions.

Risk Tip: Geysers over 5 years old should be inspected annually. Proactive checks prevent emergencies.

Storm and Hail Damage

In November 2023, South African insurers processed approximately R35 million in claims due to storm-related damages, encompassing both motor and property insurance sectors. Notably, hail damage accounted for a significant portion of these claims, highlighting the increasing frequency and severity of such weather events.

Risk Tip: Risk Tip: Reduce storm-related claims with proactive seasonal maintenance. Clear gutters regularly—especially before the rainy season—to prevent water buildup and flooding. Install hail guards on exposed glass surfaces to protect against impact damage and minimise costly repairs.

Ceiling and Roof Leaks

Ceiling damage is among the most common issues reported in sectional title schemes. However, not all such claims are covered by insurance. Insurers typically reject claims where damage results from gradual deterioration, wear and tear, or lack of maintenance. For instance, if a leak over time causes ongoing damp, mould, and paint peeling, it will not constitute grounds for a claim.

Risk Tip: Schedule annual professional roof inspections and promptly address tenant complaints. Early detection and maintenance can prevent extensive damage and ensure insurance claims are valid.​

Burst Pipes and Plumbing

In South African sectional title schemes, insurance coverage for burst pipes hinges on the nature of the damage. Sudden and unforeseen bursts are typically covered, including the repair of the pipe and resultant damages. However, damage resulting from gradual deterioration, corrosion, or wear and tear is usually excluded from coverage. For instance, if a pipe fails due to rust or pinhole leaks developing over time, insurers may reject the claim, citing maintenance issues. This distinction emphasises the importance of regular maintenance and prompt attention to plumbing issues to ensure insurance claims are valid. ​

Risk Tip: Track plumbing infrastructure and replace aging pipes before failures occur.

Fire and Smoke Damage

Fire-related incidents remain a critical concern in sectional title schemes, especially where shared roof cavities or flammable materials like thatch are involved. Recent high-profile fires at residential complexes and resorts have emphasised the heightened risks associated with poor fireproofing and outdated infrastructure. Insurers have flagged thatched-roof buildings, in particular, as high-risk structures requiring advanced fire prevention systems and stringent maintenance protocols.

These events reinforce the importance of implementing robust fire safety plans — not only to protect lives but to ensure insurance cover remains valid in the event of a claim. 

Risk Tip: For schemes with thatched roofing, it’s essential to conduct annual fire audits, service all alarms and extinguishers, and provide residents with fire safety education. Thatched structures require specialised protection — ensure fire-retardant systems are in place and compliant with current standards. For tailored advice and cover, contact SBS insurance brokers, who specialise in thatch roof insurance and can help you secure the right protection for your unique risks.

Electrical Surges and Power Fluctuations

Load shedding and unstable power supply continue to wreak havoc in community schemes. Power surges often damage electronic systems in both common property and private units, particularly when surge protection is not properly installed. Some insurers limit cover on power surge claims unless certified surge protectors are installed throughout the scheme — including in common-area DB boards and gate motors.

Risk Tip: Install surge protection devices (SPDs) at main electrical boards and advise owners to protect appliances with point-of-use devices. Schedule annual inspections of communal electrical infrastructure.

Theft and Vandalism

Sectional title and HOA schemes are frequent targets due to predictable routines and exposed shared infrastructure. Criminals may damage electric fences, burglar bars, or even access points like boom gates to enter the complex.

Risk Tip: Ensure access control systems are updated, lighting is functional, and CCTV footage is stored offsite. Review your insurance policy’s conditions around forcible entry and ensure there is no “underinsurance” on perimeter infrastructure.

Falling Trees and Branches

Strong winds, saturated soil, and neglected tree maintenance can turn trees into liabilities. Trustees are often unaware that claims for falling trees may be denied if the tree was visibly diseased or leaning.

Risk Tip: Hire a certified arborist annually to assess high-risk trees. Remove dead or overgrown branches, especially those overhanging buildings or walkways.

Boundary Wall and Retaining Wall Failures

These claims are increasingly common after heavy rainfall or nearby construction. Insurance may reject claims if the wall was poorly built, lacked drainage weep holes, or was improperly maintained.

Risk Tip: Commission an engineer’s report every few years for large retaining walls. Check for cracks, bulging, or signs of shifting. Maintain good drainage around walls.

Understanding the Legal Framework for Sectional Title Insurance

Community schemes operate within a clearly defined legal framework that trustees must adhere to. The Sectional Titles Schemes Management Act (STSMA) mandates essential elements like building insurance, fidelity cover, and proper fund management. The Sectional Titles Act governs property subdivision, ownership rights, and developer responsibilities, while the Community Schemes Ombud Service Act oversees governance practices and dispute resolution.

Failure to comply with these statutes can lead to personal liability for trustees and expose the scheme to significant financial and legal risks. That’s why it’s critical to partner with insurance professionals who understand these laws in depth.

How Fidelity Insurance Protects Your Scheme

​Fidelity insurance is a legal requirement for all community schemes, including sectional title schemes and homeowners associations (HOAs), in South Africa. This mandate is outlined in two key legislative documents:​

Sectional Titles Schemes Management Act (STSMA) – Prescribed Management Rule 23(7): This rule stipulates that a body corporate must procure insurance, as determined by its members in a general meeting, to cover the risk of loss of funds belonging to the body corporate or for which it is responsible. This coverage is specifically for losses sustained due to any act of fraud or dishonesty committed by trustees, managing agents, employees, or other agents of the body corporate.

Community Schemes Ombud Service Act (CSOSA) – Regulation 15(3):  This regulation mandates that every community scheme must have fidelity insurance that covers:

• The total value of the community scheme’s investments and reserves at the end of its last financial year.
• 25% of the community scheme’s operational budget for its current financial year.​

These legislative requirements ensure that community schemes are protected against potential financial losses due to fraudulent activities by individuals in positions of trust

Why it Matters:

Even a single act of fraud could wipe out a scheme’s rainy-day fund or delay urgent repairs. Without this cover, owners may face special levies or unpaid contractors.

Risk Management Strategies for Trustees and Managing Agents

Minimising insurance claims isn’t just about saving money — it’s about safeguarding the long-term sustainability of your community scheme and maintaining the trust of your residents.

1. Implement a Preventative Maintenance Schedule

A proactive maintenance schedule helps trustees prevent costly emergencies and protect the scheme’s long-term value. Establish a 6- or 12-month calendar tailored to key risks — such as geyser checks, roof inspections, and plumbing audits — and use a shared digital tool to track tasks and ensure accountability.

2. Schedule Regular Valuations and Insurance Audits

One of the most common pitfalls in community scheme insurance is underinsuring the property, which leads to reduced claim payouts when disaster strikes.

To avoid this:

• Commission a professional building valuation every 3 to 5 years to stay aligned with market and rebuild values.
• Review and adjust your insured sums annually to account for inflation and any major renovations.
• Keep clear records of all upgrades, improvements, and additions — these help justify your cover amounts and streamline future claims.

By maintaining accurate, up-to-date insurance values, schemes ensure they’re neither overpaying on premiums nor under-protected in times of need.

3. Work Only with Qualified and Insured Service Providers

Hiring the cheapest contractor might save money upfront — but it can cost far more in the long run if work is substandard or damages occur.

To protect your scheme:

• Always verify that service providers hold a valid trade license or professional registration.
  
  
• Require proof of public liability insurance to safeguard against third-party damage or injury.
  
  
• Ask for references, ideally from other community schemes.
  
  
• Insist on a written contract that clearly defines the scope of work, timelines, and warranties.
  
  

And most importantly, keep all documentation on file, especially for high-value or structural projects. If a future insurance claim arises, a clear paper trail can make all the difference.

4. Educate Residents to Prevent Costly Mistakes

A surprising number of insurance claims stem from simple human error — things like overflowing baths, unattended stoves, or DIY electrical work. The more residents understand their responsibilities, the fewer preventable incidents occur.

Practical ways to build awareness:

• Send quarterly newsletters with seasonal maintenance and safety tips
• Include a “Welcome Pack” for new owners that explains the scheme’s insurance and maintenance policies
• Host an annual Q&A session to discuss insurance basics and common risk areas

When residents know what’s covered, what’s not, and how to avoid common pitfalls, the entire community benefits.

5. Keep Centralised, Accessible Records

When an insurance claim is challenged — or when internal disputes arise — good documentation becomes your best defense.

Maintain digital or cloud-based files for:

• Routine maintenance logs
• Contractor credentials and warranties
• Minutes from trustee meetings
• Copies of insurance policies, valuations, and renewal documents

Using platforms like Google Drive or a dedicated property management system ensures key information is always accessible, even during trustee transitions. Clear, centralised records make governance easier and insurance claims faster to process.

Protect Your Scheme and Stay Compliant

As this guide makes clear, expert guidance is essential when managing compliance and claims in community schemes. From geyser failures and storm damage to legal requirements around fidelity cover, getting the right sectional title insurance in place is critical. When it comes to navigating the complex world of community scheme insurance — including sectional title, fidelity cover, and HOA insurance policies — working with a knowledgeable partner makes all the difference.

Specialised Broker Services (SBS) offers tailored insurance solutions for trustees, managing agents, and property investors. Whether you’re reviewing your current policy, addressing risk gaps, or planning ahead, SBS provides expert advice, trusted underwriting partners, and fit-for-purpose cover. Speak to the SBS team today to ensure your scheme is fully protected, compliant, and future-ready.