What insurance your society actually needs — and what it won't cover

Most societies discover the shape of their insurance at the worst possible moment: after a fire in the meter room, a lift failure, or a slab leak that ruined the flat below. The policy exists. Somebody renews it. Very few committees can say what it covers before they need to know.

In several states, this is not optional if the members ask

Insurance is often treated as a discretionary line in the budget. Under several state apartment-ownership statutes it is closer to a duty that any majority can switch on.

Delhi — section 16(1) of the Apartment Ownership Act, 1986 provides that the Board or Manager "shall, if required so to do by the bye-laws or by a majority of the apartment owners, obtain insurance for the property against loss or damage by fire or other hazards." Section 16(3) makes the premium a common expense.

Tamil Nadu — section 14 of the Apartment Ownership Act, 2022 follows the same pattern: the association shall, if a majority of apartment owners require it, insure the building against fire, flood, cyclone "or such other hazards," with the policy "written in the name of the association, as trustee for each of the apartment owner in the percentage specified in the declaration," and the premium again a common expense.

Two things are worth pulling out of that. First, the trigger is usually a majority asking, not the committee's own appetite — which means a committee refusing to insure can generally be overruled by the general body. Second, the policy is written in the association's name as trustee for the owners in their declared percentages. That is the same undivided-interest logic that governs common expenses, applied to the insurance proceeds.

Not every state prescribes this. Karnataka's KAOA has no state model bye-law, so what binds a Karnataka association is whatever its own registered bye-laws say — which for many associations is nothing at all. If your bye-laws are silent, the decision sits entirely with your general body, and silence is not the same as a decision.

What the building policy is actually for

A society policy insures the structure and the common parts — the building itself, lobbies, staircases, lifts, pumps, the generator, the compound. Standard fire cover in the Indian market typically extends beyond fire alone to perils like lightning, explosion, storm, flood and earthquake, and riot or malicious damage.

Two categories are commonly sold as add-ons rather than included by default, and they are the two that most often matter to an apartment complex:

• Machinery breakdown — the lift, the generator, the pumps. The thing most likely to fail expensively in a residential building is mechanical, not fire.
• Public liability — injury to a third party on your premises, or damage to their property. A visitor slipping in a wet lobby is an ordinary event; the liability from it is not covered by a plain structure policy.

Because these vary by insurer and by policy wording, treat the above as the shape of the market rather than a description of your schedule. The only reliable way to know what you have is to read the policy schedule and the exclusions, which is a very different document from the renewal notice.

The gap nobody tells the owners about

Here is the part that causes the arguments after a claim.

A society policy covers the structure and common areas. It does not generally cover what is inside an individual flat — furniture, appliances, electronics, interiors, jewellery. Those sit with the owner or occupant, on a separate home-contents policy that most residents assume the society's cover somehow includes.

That assumption is worth correcting deliberately rather than after a fire. It costs a committee nothing to say once a year, in writing, that the society's policy stops at the structure and common areas and that contents are each household's own responsibility. Put it in the AGM pack, and minute that you said it — a committee that told everybody is in a very different position from one that assumed they knew.

What to check this year

1. Find out whether your Act or bye-laws make it mandatory on request. In Delhi and Tamil Nadu a majority of owners can require it. Elsewhere, check your registered bye-laws.
2. Read the schedule, not the renewal notice. Sum insured, perils covered, and the exclusions list. The exclusions are where the surprises live.
3. Check whether the sum insured still resembles reconstruction cost. A figure set years ago and renewed unchanged is a policy that will under-pay when used.
4. Confirm whether machinery breakdown and public liability are actually on the policy, rather than assumed.
5. Check whose name the policy is in. Where the statute contemplates the association holding it as trustee for owners in their declared percentages, a policy in some other name is a problem worth fixing before a claim, not during one.
6. Tell the residents what isn't covered, in writing, once a year.

The short version

• Several state Acts make insurance a duty on a majority's request, not a committee preference — Delhi section 16(1), Tamil Nadu section 14. The premium is a common expense in both.
• The policy is typically held by the association as trustee for owners in their declared percentages.
• Karnataka prescribes no state model bye-law, so there it comes down to your own registered bye-laws — and many say nothing.
• Society cover = structure and common areas. Machinery breakdown and public liability are commonly add-ons, and they are the two that matter most in an apartment block.
• Flat contents are not covered. Say so to residents in writing, yearly, and minute it.
• Check the sum insured against today's reconstruction cost, not the figure someone set years ago.

Sources

• The Delhi Apartment Ownership Act, 1986 — full text (Indian Kanoon)
• The Tamil Nadu Apartment Ownership Act, 2022 (Act No. 44 of 2022) — full text (PRS Legislative Research)
• The Karnataka Apartment Ownership Act, 1972 (India Code)