Building insurance during settlement ... and beyond

Discussion in 'Property Management' started by tattoo, 22nd Mar, 2018.

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  1. tattoo

    tattoo Well-Known Member

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    Just paid deposit/signed for a property of $600K in Vic. Its house and land, in a slightly dodgy/crime area. I've read that I should take out building insurance to cover the period up to settlement - 90 days (pretty long) So questions:
    - any benefit in picking an insurer that I will go long term with (landlord insurance etc) or just pick one that will cover this period (ie. 'cover note' insurance, cancel before paying premiums ? noted is a long settlement)
    - how much do I insure for ? its hard to estimate the value of contents, is there a rule of thumb ?
    - any recommendations? I've seen the names of PDS, Terri Scheer, EBM around the forum, they seem solid for tennants insurance, not sure about this type of insurance ?

    Any tips leading up to settlement would be welcome too
    thx
     
  2. wylie

    wylie Moderator Staff Member

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    I've not had a cover note for many years. It seems insurers have "wised up" to this and insist on me paying for a whole year. Of course you can cancel part way through.

    Is the house empty (being built)?

    Whoever you choose, be aware that you need to ensure they know the house will be empty for longer than (usually) 60 days. I know some insurers have covered us when we've had to have a house empty for longer than 60 days, and it hasn't changed the premium, but the excess jumps up to a couple of thousand (from memory).
     
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  3. hobartchic

    hobartchic Well-Known Member

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    Maybe I'm missing something. Why would you insure a property you don't own?
     
  4. wylie

    wylie Moderator Staff Member

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    There are times when you do need to. In Queensland you insure before 5pm the first business day after signing a contract. Perhaps this sale requires insurance?
     
  5. hobartchic

    hobartchic Well-Known Member

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    I understand a couple of days before. Even a week but why months?
     
  6. tattoo

    tattoo Well-Known Member

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    bit more info
    The house is currently owner occupied, so I expect them to live in it for good part of the 90 days
    My conveyancer strongly suggested I take out this insurance. Reading about it I think I have equitable interest in the property even if the legal owner is still the seller. They should have insurance during this time, but if they don't and something bad happens (place burns down), then the ultimate loss is on me
     
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  7. wylie

    wylie Moderator Staff Member

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    @tattoo you've hit the nail on the head. In Queensland you don't have an option not to insure it. But even if we bought in another state, we would insure it. It is what we are used to and it gives us peace of mind. If the owner decides to save a few hundred by cancelling their insurance, you could be in for a rough ride unless you also have covered your bases.
     
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  8. Eric Wu

    Eric Wu Well-Known Member Business Member

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    100% agree @tattoo. comparing the cost of insurance premium and the hassle you have to go through if something does happen to it, which one cause you more headache?
     
  9. TMNT

    TMNT Well-Known Member

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    its because what happens if it burns down before settlement or day of settlement,

    youd be pretty ****** if you house burnt down on during settlment
     
  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    The risk passes at different times in different states. I think the case in NSW is the risk passes on settlement and not exchange. So if the property burns down before settlement you could pull out of the contract. But, this is different in other states.

    If you are going to get insurance you should probably cover the property for at least what the lender requires.
     
  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Just looked it up - passes on settlement or possession
    S 66K Conveyancing Act
    CONVEYANCING ACT 1919 - SECT 66K Postponement of passing of risk to purchaser
     
  12. Hosko

    Hosko Well-Known Member

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    Would you be able to pull out of the contract if the seller cannot deliver on their side of the equation ie. a complete house?
    But then the other side is if it is your dream location would you want the contract to fall over?
     
  13. D.T.

    D.T. Specialist Property Manager Business Member

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    In SA the buyer is responsible for the property during settlement , everyone organises insurance here. Might be different in other states.
     
  14. TMNT

    TMNT Well-Known Member

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    That's a question for the lawyers on here to answer

    I'm sure it's dependant on state as well
     
  15. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    This would depend on the state and the terms of the contract.
     
  16. tattoo

    tattoo Well-Known Member

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    for sake of discussion, here is the extract from the contract.
    $6K is not much, for peace of mind and trusting my solicitor's advice, I'm going ahead with getting insurance.
    upload_2018-3-23_16-10-50.png
     
  17. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Next thing to ask is if the property burns down and you are not the legal owner - will they pay you? And if so on what conditions?
    (I don't know the answer)
     
  18. hobartchic

    hobartchic Well-Known Member

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    I don't either. It seems to be that the risk is held by the vendor until settlement anyway via 24.1 (though I would make sure I was insured a few days prior to ensure coverage). I would have thought the deposit would be the only thing at risk in this scenario?
    If the deposit is held in trust by the agent, where's the benefit of insurance? Insurer would normally pay out the owner e.g. when I wrote off my car I was paid out. So I'm back to where I was before.
    Clearly the conveyancer thinks insurance is worth the money though and it's a conversation I would have with an insurer to see what it covers me for. I would be reading the PDS thoroughly to check all the terms and conditions.
     
  19. tattoo

    tattoo Well-Known Member

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    so I found a cost effective solution in my situation. As I have another IP that has insurance with Allianz, if I get insurance with them for this one, they will give free cover for this period. Premiums to be paid after settlement date ...cancellation any time....
     
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  20. hobartchic

    hobartchic Well-Known Member

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    Smart!