Do I need home insurance before settlement?

Buying a house is seen as a major milestone in the lives of many Australian adults and it can be quite a challenging process if you don’t know where to start.

Understanding the process and real estate terminology can be difficult, and there’s a lot to think about: how much you need for a deposit, finding the best home loans, minimising your interest payments, taking out LMI (Lenders Mortgage Insurance) — just to name a few.

Once you navigate this process, and you’re close to signing off on your dream home, you’ll want to protect it, inside and out, from any accidents that may happen in the future.

This is where home and contents insurance comes in.

With that in mind, let’s have a look at what you should consider when insuring a recently purchased property.  

Depending on where in Australia you’re taking out a home insurance policy will vary across all states and territories. Below we have the breakdown by state/territory:

• In Queensland, once the contracts are signed and exchanged, the buyer is responsible for the property from 5pm on the next business day.
• In Victoria and New South Wales, the buyer is responsible for any damage to the property from the settlement date.
• In the Australian Capital Territory, Tasmania, and South Australia the buyer is responsible for any damage to the property during the settlement period
• In Western Australia and the Northern Territory the buyer is responsible for insurance on the property in one of two ways:
  • On the date the buyer is entitled or given possession (e.g. inheritance or a divorce settlement)
  • Or on the date that the full purchase price is paid as part of a settlement; whichever comes first.

Despite the insurance requirements by each state, you can still choose to arrange home insurance once the deposit is paid. This is to ensure that your financial interest in your new property is covered appropriately and provides you, the homeowner, with some peace of mind.

However, If you do choose to arrange home insurance cover later, you should consider:

• If the current owner has their home insured
• If the current owner will let their insurance policy lapse
• If the current owner’s policy doesn’t provide cover for flood or Motor Burnout
• If the home is an investment property and if the current owner’s policy does have cover for Theft or Malicious Damage by the Tenant.

In either scenario, it’s important that you seek legal advice from a conveyancer or solicitor. They can provide you with guidance on when you should take out home insurance on the property you are purchasing.

When you should take out your insurance policy is also dependent on where the property is located, and insurers will take the location of your home into account when calculating your home insurance premium.

The location of your home may also determine if you can apply for optional home insurance covers before settlement, like flood or accidental damage.

When buying home insurance start by preparing a list of all the items you want to be included in your home insurance policy. This will help you understand which items may be more expensive to repair or replace.

Your home insurance should cover fixed items on your property like:

• Clotheslines, aerials, and masts
• Garages, carports, and other domestic outbuildings
• Paths, paving and gardens edges

And if you’re concerned about protecting your home before settlement then don’t worry, your home insurance policy should adequately cover the cost of hard courts, solar panels, jetties, and other items too.

If you’re wanting to get insurance for your belongings too then you should consider buying Home and Contents Insurance. Your home’s contents may collectively be your second largest asset, and this is why it’s important to protect them from loss or damage before settlement.

Your Contents Insurance should cover items in your home like:

• Carpets – fixed and unfixed
• Furniture and furnishings
• Household electrical appliances
• Internal blinds, curtains, and window coverings
• Potted plants

Once your home is insured with Budget Direct you can add contents cover to your existing policy over the phone or in your online policy manager.

A strata title property is an apartment, unit, or house that you own but also shares the ownership of common property (like external walls, foyers, or driveways) on the land the property sits on.

If you are buying a property that has a strata title, the strata scheme should already be arranged and managed by a legal entity also known as an owner’s corporation, strata company or strata corporation before the property is sold.

The owner’s corporation’s policy will normally not provide cover for your personal contents or any extra/additional structural improvements inside your home.

Structural improvements can include:

• A kitchen or bathroom renovation
• Or new air-conditioning that has been installed

When arranging your Contents Insurance before settlement, these structural improvements can be included in the sum insured for your contents in a strata title property.

As long as you follow any regulatory requirements, then purchasing home insurance before you settle will provide you with ample protection for your new home, and peace of mind for you, as the new owner.

Find the level of home and contents cover that suits your needs and get a combined 30%^ on your first year’s premium for a new policy purchased online.

See more of Budget Direct’s home buying guides.