Whether you are buying or selling a house, it is important to keep building insurance current until the final settlement of the property.
In Queensland, the risk in a property passes from the seller to the buyer when the house is put under a standard REIQ contract. The Real Estate Institute of Queensland is the leading professional real estate organization in the state.
Unlike some states in Australia where the risk passes to the buyer with settlement, in Queensland the risk becomes the responsibility of the buyer at 5 p.m. on the first business day after the seller signs the contract.
A contract becomes effective when the buyer’s written offer is accepted by the seller and signed. Most conveyancers and estate agents advise sellers to continue to carry building insurance on a property under contract until settlement.
Although standard REIQ contracts in Queensland stipulate that a buyer assumes responsibility for the building and its fixtures, a buyer may not insure the property. If there is a loss, the property may not be insured for damages.
Real estate professionals recommend that buyers take out insurance coverage as soon as a written offer is made. A buyer may not be notified within one business day that the seller has countersigned.
Taking out an insurance policy at the time the buyer signs the contract ensures that the property is covered for damages or loss.
Although Queensland law allows a five-day cooling off period for buyers to decide if they are satisfied with the purchase, the buyer may be held responsible for insuring the property until the contract is terminated in writing.
Correctly Insuring Your Property
A building insurance policy should cover the replacement cost of the property.
In Australia, 80 percent of homeowners and renters are underinsured for their homes or contents. Building insurance covers the main building and its fixtures.
Fixtures and fittings include items that are attached to the house such as carpets, light fixtures, air conditioners, some appliances and curtains. Building insurance can also cover outbuildings, pools, fencing and garages.
Check The Insurance Terms and Conditions
According to one of the respected property management team in Gold Coast, both buyers and sellers should be aware of the terms of their insurance policies. Severe weather can damage or destroy property, so buyers and homeowners should make sure that the policy covers natural disasters including bushfires, cyclones and flooding.
Many policies automatically cover bushfires, but not all cover flooding. If the property is in a flood-prone area, extra coverage may be needed.
What if Damage Occurs?
If a property is under contract when damage occurs, the buyer may be required to proceed with the purchase. An uninsured buyer is still obligated to continue to settlement, even if extensive repairs are required.
A buyer may not be obligated to proceed with the purchase if a property is damaged or destroyed to an extent that it is unfit for occupation.
Although natural disasters are not a common occurrence in Queensland, they do happen. Both buyers and sellers can protect themselves and their property by verifying that their home insurance coverage is appropriate and current.