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COVID-19 & payment options for Strata Insurance

        Coronavirus, Crisis Management, Strata Insurance

Are your Owners Corporation clients experiencing difficulties paying Strata Insurance premiums, as a result of the economic impact of COVID-19? We understand this is a real issue for OC’s around Australia, and want to assure you that there are options available to help alleviate the financial strain for OC’s at this time. 

In this article, we address frequently asked questions regarding alternative payment options for Strata Insurance renewals, allowing OC’s to make informed decisions based on their individual circumstances.

Upon renewal of a Strata Insurance policy, how long is it before payment is due?

Resolute have 30 day credit terms for payment on the renewal of all Strata Insurance policies. This means that the Owners Corporation have 30 days from the renewal invoice date before payment is overdue.  

Is a payment extension available after the 30 days?

Given the current climate and subsequent financial hardship that many Australians are experiencing, some insurers have elected to extend their credit terms. In turn, this means that we may be able to provide the OC with more flexibility in regards to the length of time they have before the insurance renewal payment becomes overdue.

Credit terms differ between each insurer – please contact your Resolute Account Manager for more information. 

Is it possible to pay Strata Insurance on a monthly basis? 

Should the OC be in a position whereby they cannot afford a lump sum insurance payment, there are monthly payment options available.

Premium Funding Programs are a flexible financial solution that enables an OC to spread the cost of Strata Insurance premiums over equal monthly instalments of up to 10 months.

How does it work? 

Once a payment plan has been finalised and approved, the Premium Funder will pay the entire Strata Insurance premium directly to the nominated insurer. Going forward, the Premium Funder will then deduct the agreed monthly payments from the OC, in accordance with the terms of the contract. 

Key points of Premium Funding: 

The benefits: 

  • A low-cost financing option with competitive fixed interest rates.
  • The interest paid to the funder can be tax deductible (clients are advised to consult their accountant to find out more).
  • It is simpler than a bank loan (fewer background checks and credit reports are required) and it does not require a guarantor.

Things to consider: 

  • Consider the interest rates being paid to the funder, and how much this might add to the Strata Insurance premium overall. If the interest is tax deductible for the OC, this may not be an issue.

For more information on Premium Funding, click here. 

Can the OC pay the Strata Insurance premium on a monthly basis through the insurer?  

Your clients may be under the impression that paying insurance on a monthly basis is a case of splitting the annual cost into 12 monthly payments, but unfortunately, it’s not that simple.

Things to consider: 

  • Some insurers do not facilitate payment plans, and therefore this may not be an option – contact your Resolute Account Manager for more information. 
  • Insurers who do offer this method of payment may charge extra and upfront fees for doing so – this therefore drives the overall cost of insurance up.

Can the OC opt for a shorter term Insurance policy? 

Reducing the period of the Strata Insurance policy from the typical 12 month term, to 6 months, may be an option. This will mean that as opposed to paying for a full year of strata insurance up front, the OC will only need to pay a premium for 6 months of cover.  

At the 6 month mark, the policy will again come up for renewal, and at that time the Owners Corporation can either pay for another 6 months of cover, OR proceed with a 12 month renewal if the OC’s financial position has improved. 

There are however, some important things to consider: 

  • Some insurers don’t offer short-term insurance policies – contact your Resolute Broker for more information 
  • Should the Owners Corporation elect to proceed with a 6 month policy, the policy may be subject to rate increases imposed by the insurers during the short-termed period. By renewing the policy for 12 months, the OC avoids paying rate increases that occur throughout the year 

We are here to help. Please contact your Resolute Strata Broker for more information on payment options discussed in this article. We will be more than happy to assist you in finding a suitable solution for your strata clients. 

T 1300 668 033  E info@resolutepropertyprotect.com.au

This insight article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Resolute Property Protect ABN 53 157 850 827 Licence Number: 425 966 for further information, or refer to our website.