6-minute read
What’s in this article
- Understanding the property settlement period
- Home insurance before settlement: a smart move or not?
- The impact of your home and its location on your insurance
- Is home insurance compulsory in Australia?
- What should a home insurance policy cover?
Understanding the property settlement period
First up, let's talk about the property settlement period. This is the time between signing the contract of sale and the day you get the keys. In Australia, settlement periods vary from state to state. The length of your settlement period is usually negotiated on your behalf by your solicitor or conveyancer and gives you time to check the accuracy of documentation and organise finance, if required.
Home insurance before settlement: a smart move or not?
Wondering if you need home insurance before settlement? The answer is... it depends.
There's no legal requirement to hold a home insurance policy before your settlement date but, in some cases, you could be liable for damages before you pop the champagne on settlement day. Each state and territory in Australia has different laws regarding property liability and it's important to understand these so you know what you could be on the hook for.
Australian Capital Territory, South Australia and Tasmania
In the ACT, South Australia and Tasmania the buyer assumes responsibility for the property after exchanging contracts.
New South Wales and Victoria
New South Wales and Victoria take a different approach, with the buyer responsible for damage to the property at property settlement.
Northern Territory and Western Australia
In the Northern Territory and Western Australia the buyer is responsible for damage to the property either on:
- the date the full purchase price is paid or
- the date the buyer is entitled to or is given possession of the property,
whichever date is first.
Queensland
Queenslanders accept liability for any damage to the property from 5pm on the next business day after exchanging contracts.
The impact of your home and its location on your insurance
There are other ways your home's location can make a difference to your insurance. Luxury beachside property? Hideaway bush shack? Each location and house comes with its own set of risks. If you're planning on buying a house in a high-risk area it's worth understanding the impact your property’s location and the cost to rebuild will have on your insurance premiums when purchasing home insurance.
Is home insurance compulsory in Australia?
While home insurance isn't legally mandatory in Australia, most home loan providers require it. They may request a copy of your insurance policy schedule or a certificate of currency that includes details like your new property address and sum insured to make sure you have adequate insurance.
What should your home insurance policy cover?
Navigating home insurance can seem daunting, but it's an essential part of the home-buying process. Understanding your responsibilities, choosing the right cover, and being aware of regional differences can save you from future headaches. If you're new to home insurance, you may like to read our article that answers five common home insurance questions.
Home insurance cover should consider your financial situation and particular objectives to make sure you have the right cover for your needs. In short, a good home insurance policy should:
- cover various unexpected events, including natural disasters, theft, and vandalism.
- combine building insurance (the physical structures and fixtures) and contents insurance (for your personal possessions) in a home and contents insurance policy for holistic coverage.
- have a sum insured and excess tailored to your needs.
Buying a new home can come with a hefty price tag so it's wise to invest a bit of time in comparing quotes and doing your own research. You may consider researching tips to get value from your home insurance to make the most of your first year's premium.
Strata insurance
If you're buying a strata title apartment or a strata title home, you'll need to understand the role of residential strata insurance within the strata scheme. This insurance, usually managed by the body corporate, covers common property areas within the scheme, protecting against various risks. If your new property is part of a strata scheme with residential strata insurance, it won't include cover for the personal belongings inside your apartment or home. You'll need to take out a separate home contents insurance policy to make sure your contents are covered.
