Property Insurance

Should you take our building insurance when you sign the contract of sale for a property & pay a deposit or wait until settlement?
Someone has advised me that it should be organised at the time you sign the contract but wouldn't the current owners already have building insurance as it is technically still their property until settlement.
Hi July!

Yes, it is still their home, but... Once you sign the contracts and pay your deposit, you have a registerable interest in the property, and legally, you are a 'part owner' of the property.

The Sale of land act in Victoria states that the Vendor must hold insurance for the purchaser. (I have included this section of the act below). HOWEVER, I must hasten to add, there have been cases where the Vendors have not held this insurance, and there is nothing the purchaser can do, but sue them. Do you want to go through that? The other thing is that I have heard of insurance companies only paying out 90% of the claim value because in their view the new purchaser 'owns' 10% of the property, and they should have insured it. There are further powers of recision available to the purchaser in the event of total destruction of the house.

I believe that, for the extra month or two's insurance, I wouldn't risk the problems, better to be insured and let the insurance companies fight it out.

I always recomend to anyone I sell property to, that they insure the property IMMEDIATELY they have signed the contracts, get a cover note, they go for 14 days, and by then the property will be unconditional.

hope this helps

asy :D

Insurance held by vendor to enure for benefit of purchaser

35. Insurance held by vendor to enure for benefit of purchaser

(1) During the period between the making of a contract for the sale of land
and the purchaser becoming entitled to possession or to the receipt of rents
and profits pursuant to the terms of the contract, any policy of insurance
maintained by the vendor in respect of any damage to or destruction of any
part of the land agreed to be sold pursuant to the contract shall in respect
of the said land, to the extent that the purchaser is not entitled to be
indemnified under any other policy of insurance, enure for the benefit of the
purchaser as well as for the vendor and the purchaser shall be entitled to be
indemnified by the insurer under any such insurance policy in the same manner
and to
the same extent as the vendor would have been if the land had not been subject
to the contract.

(2) It shall not be a defence or answer to any claim by the purchaser against
the insurer made under sub-section (1) hereof that the vendor otherwise would
not be entitled to be indemnified by the insurer because the vendor has
suffered no loss or has suffered diminished loss by reason of the fact that
the vendor is entitled to be paid the purchase price or the balance thereof by
the purchaser.

(3) A policy of insurance shall not enure for the benefit of a purchaser under
sub-section (1) hereof if the insurer establishes that a prudent insurer would
not have insured the purchaser against the risk covered by the policy.

(4) At any time prior to the happening of the risk insured against an insurer
made liable to a purchaser under sub-section (1) may terminate that liability
by giving notice of such termination to the purchaser in not less than three
clear business days.

(5) A notice under sub-section (4) shall be in writing and shall be served
upon the purchaser personally or in the case of a company by leaving it at the
company's registered office.

(6) The contract of insurance shall terminate at the expiration of the period
specified in the notice.

(7) The service of a notice under sub-section (4) shall not affect the
liability of the insurer to the vendor under the policy of insurance.

(8) Where money becomes payable under a policy of insurance in respect of any
damage to or destruction of part of the land agreed to be sold the money
shall, on completion of the contract be held or receivable by the vendor on
behalf of the purchaser and paid by the vendor to the purchaser on completion
of the sale or as soon as the money is received by the vendor (whichever is
the later).

(9) Notwithstanding sub-section (1) an insurer shall not be entitled to deny
liability to the purchaser because of a fault on the part of the vendor by
reason of which the vendor would not be entitled to make a claim under the

(10) This section-

(a) shall apply to a contract for the sale of land made after the
commencement of section 3 of the Sale of Land (Amendment) Act 1982;

(b) shall have effect notwithstanding any stipulation or term to the
contrary contained in the contract of sale or any policy of insurance
as referred to in sub-section (1).

(11) This section shall apply mutatis mutandis to a sale or exchange by order
of a court.