Insurance before settlement

[TheGreenLeaf]

Hi everyone,

A question I'm having:
What happens if you sign an unconditional contract of sale for a property and there is a major event (fire, flooding, ...) to the property prior to the settlement and the current owner is not insured?
Is the contract still binding ( I would expect so if unconditional)? Would there be a way to get out of it?
Otherwise, it sounds like a safe option to have the landlord insurance to start from Contract signature...

Thanks in advance for your answers.
Cheers,
Eric

 

[Mazkal]

Hi,

I recently bought my first IP in Brisbane and was actually required to have insurance from contract formation rather than from the date of settlement. I was quite surprised at this however after reading your post I guess it makes sense. Thankfully I arranged a short settlement so I was only paying for one additional months insurance.

 

[Peter_Tersteeg]

The specific rules do vary from state to state, in some places it's technically the vendors problem and in others it's the purchasers responsibility.

The general wisdom is to insure the property from the day you sign the contract regardless of which state the property is in. What you need is building insurance (not landlord insurance which covers tenant related issues). Most insurance companies will insure the property immediate but only start charging you from settlement.

 

[Aaron_C]

Basically you buy the property as is but there can be conditions in there to make the contract void if the house burns down or a meteor hits it etc (principle of force majeure). Had a couple of clients pull out due to the tenants burning down the house when they were informed the landlord had sold the property and they were due to be kicked out.

 

[JacM]

There is also the matter that your lender will expect to see proof that you have taken out an insurance policy on the property before they will honour your signed mortgage documents and allow settlement to be booked....

 

[jerrybee]

There is also the matter that your lender will expect to see proof that you have taken out an insurance policy on the property before they will honour your signed mortgage documents and allow settlement to be booked....

This. One of the 7 things on Bankwests checklist is proof of insurance.