Many buyers are confused about their need for home insurance between the time the contract is signed and the final settlement prior to moving in. Here are some reasons for the confusion and the right steps to take regarding insurance.
Although there are variations in property law for different Australian states, the terms of contract usually transfer insurance risks from seller to buyer as soon as the contract is signed. The time between signing the contract and final settlement is most commonly between four to six weeks, with many people unsure of their need for insurance during this period. A legally binding contract also includes fine print, and every word should be fully understood before entering into what, for most people, is their greatest financial investment.
What is the seller’s responsibility?
The seller has an obligation to take care of the property between the sale and settlement dates, ensuring there is no property deterioration during this time. Even if the property becomes the buyer’s risk prior to settlement, it’s a good idea to remain insured until settlement. The property would otherwise be uninsured if the buyer doesn’t insure for the sale/settlement period.
What steps should the buyer take?
The buyer should take out an insurance cover note as soon as the contract is signed. In some cases the buyer may not immediately be notified at the time the seller counter-signs, meaning the investment could sit uninsured for a period of time. Some insurance companies offer free insurance for the duration between signing the contract and settlement date, so it can pay dividends to investigate various insurance company policies.
Is the insurance policy different for vacant land?
If the land is vacant at the time of purchase, a buyer can use public liability insurance during the construction phase. As soon as building finishes, it’s time to invest in a comprehensive insurance policy covering both the land and building, including improvements such as carpets, fixtures and furniture.
My unit is overseen by a body corporate. What does that mean?
The body corporate insurance responsibility is for common property, including common walls and other building or property assets. The buyer should insure for unit contents and public liability.
In the case where the buyer is uncertain, an insurance premium covering the building and contents will safeguard against any unforeseen events. Once it’s determined that the body corporate has appropriate building insurance, the buyer can cancel any unneccessary building insurance.
What is landlords insurance
Buyers should understand the difference between being an owner-occupier and being a landlord. If your property is going to be rented out following settlement you will require a policy suited to your needs. A standard building and contents insurance policy will not cover every scenario. Risks include:
- damage caused by tenants
- theft of household paraphernalia
- non-payment of rent
- legal expenses incurred in settling a claim against a tenant
In every case, it’s in the buyers best interest to investigate all insurance options, carefully study the insurance policy, and take out appropriate insurance to cover any situation that could affect you as the home or property owner.