Residential vs commercial strata insurance

Residential strata insurance is intended for buildings used mainly as homes. Commercial strata insurance is intended for schemes with a material business, retail, hospitality or industrial use.

Mixed-use buildings sit between those descriptions. Providers often use the percentage of commercial floor area and the type of tenants to decide which product or underwriting team should assess the scheme.

The word strata describes the ownership structure. It does not tell an insurer everything about the risk.

What counts as residential strata?

Residential strata can include:

• apartment buildings;
• unit and villa complexes;
• townhouses with shared property;
• duplexes or small schemes; and
• mainly residential mixed-use buildings within a provider's permitted commercial share.

The property must still fit the target market for the product. A residential product may not accept a building used as a hotel, resort, boarding house or other accommodation business.

The number of people who live in the building can also matter. A building that is vacant, under construction or used heavily for short stays may need referral.

What counts as commercial strata?

Commercial strata can include schemes containing:

• offices and professional suites;
• shops and showrooms;
• cafes, restaurants or food businesses;
• medical or allied-health premises;
• warehouses and storage units;
• light-industrial units;
• manufacturing premises; or
• several uses in one scheme.

These activities do not carry the same risk. An office building and a complex with commercial kitchens, stored chemicals or late-night licensed premises can be treated very differently.

The provider needs the actual tenant activities, not just the description “commercial”.

How mixed-use strata is classified

A mixed-use scheme combines residential and commercial use. A common example is apartments above shops or offices.

Some current providers use 20% commercial floor area as a product boundary:

• CHU's residential target is for schemes with less than 20% commercial floor area. A different CHU product route is needed above that point.
• Strata Community Insurance describes its commercial strata product as being for schemes with 20% or more commercial floor area.
• Hutch's published residential appetite allows up to 20% commercial use.
• Vero states that its residential product can include mixed-use buildings with up to 20% commercial floor space in the regions where the product is available.

These examples do not make 20% a universal rule. Another provider may use a different measure or consider the whole risk on referral.

Count floor area as well as lots

Lot count can give the wrong answer.

A scheme with 20 apartments and one large supermarket lot may have a substantial commercial floor area. Another scheme with several small office lots may still be mainly residential by area.

If the exact percentage is not known, provide:

• the number of residential and commercial lots;
• approximate floor area for each use;
• the strata plan, if available;
• a current tenancy schedule; and
• a short description of each business.

Select Not sure in the Specialist Compare quiz if the committee cannot confirm whether commercial floor area is below or above 20%. Unknown information does not count as a decline.

Why the type of commercial tenant matters

Offices and ordinary retail

Offices and many ordinary shops often fit a provider's stated commercial appetite. Chubb lists office and retail within its preferred commercial business.

Acceptance still depends on the building, location and claims history.

Food and hospitality

Commercial kitchens add heat, grease, extraction systems and higher fire risk. The provider may ask about cooking methods, fire protection, cleaning and the share of floor area used by the business.

Some public appetite guides limit or refer schemes with a high proportion of cooking tenants.

Licensed venues and late-night businesses

Bars, nightclubs and other licensed venues can create different fire, liability and security exposures.

Chubb lists buildings with nightclubs or bars as non-preferred. Its public appetite also names tattoo parlours, tobacconists or vape stores, brothels and adult entertainment among non-preferred tenants.

“Non-preferred” is not the same as a confirmed decline. It means the risk should not receive a positive ranking signal and may need specialist review.

Storage, industrial and manufacturing use

The stored goods, processes and fire load matter. Light storage can be treated differently from manufacturing, spray painting or chemical handling.

Hutch's commercial material describes a broad occupancy range, with some manufacturing and wholesale risks assessed case by case. Rubix states that it considers commercial and industrial strata, including some hard-to-place risks.

Give the broker or insurer an accurate business description. A tenancy schedule using only broad labels such as “warehouse” may not be enough.

Serviced apartments and short-stay use

Accommodation can look residential but operate as a business.

Longitude's residential target material includes a percentage boundary for serviced apartments. Sure says short-term rentals can be considered if its criteria are met.

These are provider-specific examples. A scheme should disclose the actual use, the share of short-stay lots and any onsite management.

Provider routes in the launch panel

This table identifies product routes. It does not say every listed provider will quote or accept the scheme.

When a building may need a specialist referral

Use a broker or specialist route where the scheme has:

• a commercial proportion close to a product boundary;
• a tenant that is not clearly described in public appetite material;
• manufacturing, high-hazard storage or a late-night licensed venue;
• known structural, waterproofing or fire-safety defects;
• ACP or EPS cladding;
• major works or staged development;
• low occupancy or prolonged vacancy;
• a difficult claims history; or
• a high natural-hazard exposure.

A referral is not a rejection. It means the provider needs more information before deciding.

Information to prepare for a commercial or mixed-use quote

Scheme details

• Legal scheme name and registered plan.
• Property address and building sum insured.
• Number and type of lots.
• Current policy schedule and renewal date.

Tenant details

• Tenancy schedule.
• Business activity in each commercial lot.
• Commercial floor-area percentage.
• Hours of operation and vacancy details.
• Cooking, storage, manufacturing or licensed activities.

Building and risk records

• Construction and year built.
• Fire-safety systems and current certificates.
• Claims history.
• Defect and cladding reports.
• Major works or remediation plans.
• Current replacement-cost valuation.

Do not wait for the quote form to reveal a material use. An incomplete description can delay the decision or affect the policy later.