Protect your body corporate or homeowner’s association with fidelity insurance
If you are a trustee of a homeowner’s association (HOA) or residential body corporate (RBC), you may be overlooking critical insurance gaps
One common oversight is fidelity insurance, and the required cover needed.
Since the 2016 amendments to the Sectional Titles Schemes Management Act 8 of 2011 (STSMA), fidelity insurance has become mandatory for RBCs.
It’s important to note that the decision to obtain fidelity insurance is taken by the scheme members at a general meeting, not by the trustees.
Equally important to note is that standard policies might already include a specified amount of fidelity insurance cover.
In some cases, this may still not be enough, so it’s important to understand your RBC’s or HOA’s specific needs before settling on a cover amount.
Understanding fidelity insurance
Fidelity insurance safeguards against financial losses due to fraudulent or dishonest acts, the loss of money of theft by trustees, managing agents, or anyone with access to the RBC’s funds.
It is important to note that if your RBC’s funds are held and managed by a managing agent’s trust account, the managing agent should typically have their own cover, through the Estate Agents Affairs Board Fidelity Fund.
However, if the funds are held in the RBC’s own bank account and controlled by the trustees, separate fidelity insurance may be needed.
Calculating the required cover
To comply with the STSMA, the minimum amount of fidelity insurance coverage should equal:
- The total value of the community scheme’s investments and reserves at the end of the last financial year.
- 25% of the community scheme’s operational budget for the current financial year.
TIH Advisory: Modern financial advice tailored to you
We understand that as an RBC or HOA you have unique insurance needs.
In today’s fast-paced environment, you may appreciate the convenience of digital insurance platforms – but for more complex needs, personalised face-to-face advice from experienced specialists is invaluable.
TIH Advisory is a new generation of financial advisers who believe in personalised service and solutions.
Our team of expert advisers is spread across South Africa and works with leading and award-winning financial brands.
Unlike traditional financial advisers, we don’t just protect you from risk – we also help you embrace it with confidence.
We’ll take the time to understand you before we advise you, making sure we have a complete picture of your financial position and your goals, and the gap between what you have and what you need to achieve it.
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