Queensland insurance requirements when purchasing property vary significantly from other states and territories in Australia. To avoid any undue risk, a buyer must be aware of their insurance responsibilities on signing a Freehold contract.
Things to consider:
· Who is responsible for insurance during the settlement period?
· Do you need building insurance before settlement?
· Why home insurance is important?
Transfer of Risk
The risk of the property is transferred to the buyer at 5 pm on the first business day after the contract is signed. This transfer of risk is not delayed where a contract is subject to cooling off or conditional on building and pest or finance conditions.
When Should Insurance Be Taken Out?
With the transfer of risk, comes the responsibility of insurance coverage. Under a standard Freehold REIQ contract, the buyer is responsible for the property insurance (Note: this excludes body corporate insurance) from 5 pm the next business day after signing the contract.
What if the Vendor already has Insurance?
The common misconception when purchasing in Queensland is that the property is covered under the Vendor’s insurance. This is not entirely untrue as the property will still be covered under the Vendors policy until such time that the title is transferred, or the policy is cancelled. However, in the event of damage to the property, a buyer cannot make a claim on the Vendors insurance. Regardless of whether a property is already insured, a buyer cannot rely on the Vendor’s policy to protect them in the event of damage or failure by the Vendor to insure.
The Importance of Insurance
As beforementioned where the property is damaged before settlement, there is no guarantee the Vendors insurance policy will cover the damage. Subject to the conditions of the contract, after such time as the risk is transferred, a buyer cannot terminate a contract on account of property damage. This means an uninsured buyer will inherit the damage on settlement. A buyer should mitigate this risk by taking out an insurance policy immediately on signing the contract especially if the Vendor has let their policy lapse during the period time of the contract.
It is recommended that a buyer conducts all due diligence with respect to Insurance obligations under the contract with their Solicitor/Conveyancer, Mortgagee and or Insurance Company.
By Aspen Roggeveen
DISCLAIMER: This article is only meant to give you general information and should not be relied on as legal advice. Speak to one of our lawyers for more information.
Salerno Law is managed by Emma Salerno, Managing Partner and CEO, who has a wealth of experience from operating her own businesses across Australia as well as a range of in-house and commercial experience both in Australia and overseas.