Commercial Property - Buy Insurance On Signing Contract Or At Settlement?

Hi PCers,

Bought a commercial property with an extended settlement period of 4 months. When should I buy insurance? There seems to be two schools of thought...

A) buy insurance once you've signed the contract because if something happens to the property the seller will have insurance, but you also should have insurance because you have a financial interest in the building...

B) buy insurance at settlement because if something happens to the property the seller will have insurance, and you have no entitlement over the property until then...

I tried to get commercial insurance, but the the broker said it's better to wait until settlement....

I've heard the horror stories of houses being burnt down prior to settlement, and the onus has been on the buyer to have insurance...

What are your thoughts?

 

My view is you take out insurance a soon as you have an equitable interest and unconditional contract

 

This has been my modus operandi since day one. Best to be covered.

Of course in states such as Qld, the property is at the buyers risk until settlement anyway.

 

• What does your solicitor and insurance broker recommend?
• Will the insurer pay out if the property is damaged before settlement?
• Have you asked if the vendor has adequate insurance should damage occur?
• Can you be listed as an interested party on their policy?

 

Would it be possible to include a clause in the purchase contract that renders it dead if an event transpires that damages the property? This would then give the buyer an out or position to negotiate from.

I guess it is not applicable here as it looks like the contract has been signed but it would be good to know in general. Then one only needs to take out insurance from settlement.