If you’re wondering who’s liable for claims related to a property during the settlement process, well done. You’re a thinker. Not many people think about it, which is a bit of a worry. There’s no such thing as “Settlement Insurance” per se. Taking out building insurance during the settlement period though is very important.
Do I need Settlement Insurance?
First up, it’s worth noting that most Purchasers don’t consider insurance necessary on a vacant block of land. The Lender doesn’t require it, and many Purchasers see it as minimal risk. If however, someone goes on the land and hurts themselves, public indemnity insurance could save you a lot of money and grief.
If there’s a building or a structure on the land though, the Lender will require a copy of the insurance policy noting the property address. The policy will also need to note the Lender as having an interest in the property. Without this, settlement won’t occur.
When does the Purchaser become liable?
As soon as all parties have signed the Contract, the Purchaser becomes responsible for any claims relating to the property, unless noted otherwise in the Contract. So it’s best to arrange your insurance as soon as you sign the Contract.
In some instances, there can be exceptions to this. If the Vendor is at fault during the settlement period, then they are liable for the claim. Therefore, as a Vendor, it’s best not to cancel any policy you have on the property until settlement is completed.
What about Strata or Community Plan properties?
You’ll need to check (and double-check) with the Body Corporate, but they may already have the necessary insurance in place (check this previous blog for further information). It won’t cover your contents though, so you need to keep that in mind. Flooring and window treatments may not be covered, so include these items in your coverage in case of flood or any other occurrence.
Each state in Australia words the contract clauses differently, but there’s some good information here that keeps it clear.
There’s some valuable information around household insurance here too.
If you’d like to discuss any settlement insurance queries, drop us a line here and we’ll help you out.