Insuring Before Property Settlement - What's the risk?
You have signed a contract to purchase a property but have not settled yet. You may not even have your finance approved yet, but you are told you should take out insurance!
Well, there are sound legal reasons for this. As soon as you sign a contract to purchase a property you do have a legal risk worth insuring against, regardless of what the contract says.
The risk is that the property is damaged between the time you sign the contract and the time for settlement.
The seller is not necessarily obliged to repair that damage or to insure for it.
Even if the seller had such an obligation, should you trust them to do it?
The Property Law Act 1974 (Qld) does entitle a buyer to terminate a contract if a dwelling is destroyed or damaged before settlement so as to be “unfit for occupation”, but in less extreme circumstances, or where the damage is not to a dwelling, you could face the prospect of having to settle on the purchase of a damaged property.
Even if you did have the right to terminate due to the damage, if you have the benefit of insurance, the property may remain a good investment for you and you could still choose to proceed.
- as soon as you sign the contract, you absolutely do have an insurable risk;
- do not trust the seller or anyone else to protect you from that risk; and
- take out property insurance immediately to be sure that your investment remains a sound one.
If you have any queries about insuring your property before settlement or any other aspect of property law, please contact us.