Insurance - why it matters!

There is often confusion about who is responsible for the property insurance for the period between entering into a Contract and the settlement date.

When you sign a contract to buy a house or a unit or even vacant land, one of the first things you will be told is – take out insurance.

“Why is it so important?  I don’t even own the property yet”, you might ask.

What do Contracts say about insurance?

The standard terms of contract usually provide for the risk in a property to pass from the Seller to the Buyer from 5pm on the first business day after the date that the Contract is signed by all parties.  These standard provisions are contained in the “fine print” of the Contract.

This means that if the property is damaged between the Contract date and settlement, the Buyer is required to proceed with the purchase. Obviously that would not be the case if the Contract was still conditional upon a satisfactory Building and Pest inspection or Finance approval (as those conditions would fail) but once the Contract is unconditional, you are committed, no matter what.

Your next question then will most likely be “What type of insurance do I need?”

If buying a home

You would be encouraged to arrange a Home and Contents package which also includes public liability.  This type of policy would insure the property for any third party personal injury claims; the dwelling against loss or damage as well as your content (eg fixtures and fittings / electrical motor burn out etc).  

If buying a unit

If buying a body corporate unit or townhouse that is part of a Community Titles Scheme, the body corporate is responsible for insuring the building for replacement value and public liability for the common property and any other relevant body corporate assets.  It will not however, cover the contents of the unit (for example, carpets, curtains, internal blinds and appliances) nor will it cover public liability insurance for the interior of the unit.  

If buying vacant land

It is a common misconception that it is not necessary to take out insurance when buying vacant land.  There are still relevant risks that Buyers need to insure themselves against.  Public liability insurance is essential when it comes to protecting yourself from possible claims relating to bodily injury or property damage.  For example, if someone were to have an accident and injure themselves on your property, this type of insurance would protect you as the owner of the land against a damages claim. 

Most financiers will require evidence of insurance prior to settlement (noting their interest), so the earlier you have it in place the better and it will avoid you overlooking it in the excitement of packing and getting ready for your move. In the event that your Contract is terminated (eg due to finance being declined) you can simply cancel your policy and obtain a pro-rata refund of any premium paid.

Taking these simple steps will ensure you have peace of mind that regardless of what happens, you and your assets are covered.


This information is provided as a general guide only and should not be used or relied upon by any person without obtaining legal advice in relation to their own circumstances.

"Liability limited by a scheme approved under professional standards legislation"


"Liability Limited by a scheme approved under professional standards legislation"