For anyone buying a home, making sure you’re insured is vital. Home and contents insurance could provide you with peace of mind that comes with believing you’re covered for all sorts of situations. The reality is that, at some stage during your settlement journey, your property or its contents could be seriously affected or damaged, and, as the new owner, everything that happens to the property could be your responsibility. But what should you consider when choosing insurance and when is the best time in the sale-to-settlement process for you to get it? We have set out some key information below.
Get an insurance policy to suit your needs
Just as every home is different, lots of insurance policies differ too. As you start to make plans to take out a policy to protect your home, it’s a good idea to compare a wide range of options. Talk to an insurance provider about your property to get started on the policy that’s right for you.
Manage your risk
Insurance policies are personal. Each homeowner will have a different approach to risk, as well as different financial considerations to consider. For some, a basic policy may be all they want. Others may want assurance that they’re covered in almost any situation. When you’re preparing to buy a property, it’s a good idea to start thinking about the type of insurance policy and level of cover you want (and need), and to discuss your options with an insurance provider.
It’s more than just a house
One of the major differences between insurance policies is between home insurance and home and contents insurance. The policies generally differ in what they protect, with one usually providing protection in relation to the house itself and the other in relation to both your home and its contents. Contents insurance policies could include optional extras, such as protection against accidental damage and even portable contents insurance for things like jewellery and electronic devices that you take with you outside your home. Speak to your insurer to find out what is and isn’t covered under your policy.
If you are buying into a strata or unit complex, the body corporate or owners’ corporation usually takes out insurance for the building, and you only need to take out insurance to cover your contents, fixtures, and fittings. Speak to your insurer to find out what extra coverage you may require (such as public liability insurance for common areas).
When should you take out insurance?
So now you’ve thought about the type of insurance you need – when should you get it? The general position differs between states and territories – so, it’s a good idea to speak to an experienced insurance provider for clarity around when the responsibility for insurance passes to you (this is sometimes referred to as the “passing of risk”). For example, if responsibility to insure the property passes to you at the exchange of contracts, damage that might occur before settlement (except for damage caused by the seller) becomes your responsibility to repair. Again, it’s important to speak to your preferred insurer about when it’s necessary to take out insurance. To give you an idea of the process, here’s a breakdown of when insurance is generally bought across each state and territory:
New South Wales and Victoria
The buyer usually becomes responsible for the property on the settlement date, with the seller generally being responsible for the property during the time leading to settlement day. To be sure your property has the insurance protection it needs, speak with your insurance advisor. It’s also important to check with your lender, who may have their own expectation around when you must take out an insurance policy on the property.
Northern Territory and Western Australia
In both the Northern Territory and Western Australia, the buyer is usually responsible for the property either when they are entitled to, or given possession of, the property, or when the full amount of the purchase price is paid (whichever comes first).
Although the general position is that the “passing of risk” occurs in these states on the date of settlement (or earlier possession), we recommend that you consider taking out insurance from the date of the contract to protect your equitable interest in the property.
Unlike New South Wales, Victoria, Western Australia and Northern Territory, buyers in Queensland generally become responsible for the property from when they sign the contract of sale. This means that it’s a good idea for buyers to have insurance ready before they sign. Be sure to speak with your solicitor to fully understand your responsibilities and rights as a buyer. Generally, an incoming buyer becomes liable at 5pm the day after both parties have signed the agreement.
Australian Capital Territory (ACT), South Australia and Tasmania
In the ACT, South Australia and Tasmania, the buyer is usually responsible for the property during the contract period, so it’s a good idea to have insurance ready for when the contract is signed.
Whatever stage you’re at on your property settlement journey, it’s important to consider your insurance options and be ready to take out the necessary insurance so that your new home is fully protected.
For more information, and to find the policy that’s right for your needs, speak to your insurance provider. For information about when you should take out insurance, speak to your conveyancer.
This article is provided for general information purposes only. Its content is current at the date of publication. It is not legal advice and is not tailored to meet your individual needs. You should obtain specialist advice based on your specific circumstances before taking any action concerning the matters discussed in this article.