When should I insure the property I’m buying?
Most of us appreciate the value of home insurance, especially when it comes to protecting one of the most significant financial assets you will ever own.
But if you’re buying a property, when do you need to have insurance in place?
That’s actually a very interesting question, because different states and territories have different dates during the sale process for when the buyer takes over responsibility for any damage that might occur.
So, let’s investigate further…
What is home insurance?
Home insurance is designed to cover a property in the event the building or its interior is damaged by an unexpected event, such as fire, flood, cyclone, storm, etc.
Different policies have different provisions, but the bottom line is this is the type of insurance that will pay for repairs or replacement should something unexpected occur.
Most lenders will actually require you to have insurance as a condition of issuing you a loan.
But here’s the kicker…because each state and territory has different laws, you might be responsible for insuring a property you are purchasing long before the property officially becomes yours at settlement.
Different states and territories, different rules for insurance
Although it might seem natural to assume insurance should kick in on the day you settle on your property and officially take possession of the keys, that’s not actually how it works.
Each state and territory has different provisions, with some requiring insurance to commence when contracts are signed and others saying it should occur at settlement.
So, let’s walk through each state and territory and what’s required.
According to Canstar, this is the position each state and territory typically takes:
- NSW and VIC: the buyer is responsible for damage to the property on settlement.
- QLD: the buyer is responsible for damage to the property from 5pm the next business day after the contract date (this is before settlement).
- SA, ACT and TAS: the buyer is responsible for damage to the property as soon are contracts are exchanged.
- WA and NT: the buyer is responsible for damage to the property on either the date the whole purchase price is paid or the date the buyer is entitled to or is given possession of the property (whichever comes first).
A word to the wise
Although the above are the general guidelines, your contract of sale might actually state different terms to what is listed above. That’s why it pays to be clear on what’s in a contract of sale and to gain some legal advice around it.
In the meantime, insurance policies can vary, so it’s important to read the fine print of exactly what your home insurance policy will cover.
For example, some policies don’t have flood cover as a standard inclusion, while others might view types of flood events differently.
Regardless, a property is a significant financial asset that should be protected with insurance in order to secure your future.