Get insurance right away
A lot of people aren’t aware but it’s really important that you arrange Building Insurance (also called Home & Contents Insurance) as soon as you purchase a property – that is from the date you sign the Contract of Sale!
There are a few reasons to get insurance right away including the fact that the seller’s insurance policy may no longer be valid that the property has been sold, or the seller may not have insurance and also in Queensland it is common for the Contract of Sale to specific insurance is the purchaser’s responsibility.
So in Queensland, you need to get insurance from 5 pm the next business day after signing a contract of sale (unless it’s a strata apartment in which case the Owners Corporation might have insured the building). Not having home insurance is very risky, as it covers you for any loss or damage to the building.
Your bank or lender will want proof the property has insurance on it, so it’s best to get it right away because you are going to need it eventually. Sometimes lenders want their borrowers to get building insurance before proceeding with the settlement. In fact, they want it to be included in the policy.
Why Do You Need Building Insurance?
There is often confusion about who is responsible for the property insurance for the period from signing the contract until settlement.
According to FindLaw:
In Queensland, contrary to the practice adopted in some other states and sometimes assumed by parties to the property transaction, the standard terms of contract usually provide for the risk in a property to pass from the seller to the buyer, not from the settlement date, but from 5 p.m. on the first business day after the date that the seller signs the contract.
So you need to make sure you have insurance from 5 p.m. on the first business day after the date of signing the contract of sale; it’s incredibly important.
When you plan to buy a house, it is important to protect your property against any possible risks. Building insurance usually gives you coverage against any damage that may occur due to rainwater, fire and most natural disasters. It covers items such as air conditioners, switches, cables, pipes, light fittings, hot water system and more. In many cases, gates and fences are also covered in the insurance contract. It also provides coverage of valuable items like washing machines, furniture and computers.
Many insurance companies design discounted bundles that allow you to get coverage for the building and the belongings too.
How Much Should You Insure for?
This is a critical answer that has to be decided when it comes to organising building insurance. Building insurance will cover the labour and raw material cost that is required to rebuild the house if it gets destroyed by any natural disaster or other reasons.
Normally, an insurance company estimates the insurance amount in two ways:
- It evaluates the condition of different building elements to compute the rebuilding cost. This gives the insurer an idea about how much the cost (labour and raw material) of what they need to reconstruct the building will be.
- The company uses a cost per square metre method, which gives a rough estimate of the material used and the size of the building.
Underinsuring is a very common problem in Australia. If you are buying a house in a high-risk area where floods or forest fires are common, it is better to get a correct estimate of how much you should get to receive complete coverage in case of a disaster.