Home insurance on house to be demolished

Salutations fellow investors, long time reader, first time poster here.

Have recently had an offer on a block of land with an old, dilapidated house on the site accepted - finance has been approved and now waiting 90 days for settlement. My plan is to knock the house down soon after settlement and construct new residences. The bank has requested as a condition of finance to have the house insured for a certain value - a value much greater than what the house is actually worth (in my opinion). Being that the house won't be standing for much longer, can anyone recommend the best way to satisfy the bank as well as insure the property? Policies I've looked at insure for 12 months and cost roughly $900, an amount of time I won't need as I'm hoping to demolish within 6 months. Is there such a thing as a short term home insurance policy? A quick google hasn't revealed much, but does anyone have an alternative workaround for my situation?

Thanks in advance!

 

Cancel the policy just prior to demolition.

 

Thanks Scott no Mates. Do I get a refund for the remaining time on the policy if I do so?

 

Should do but check with your insurer.

 

Will do. Thank you!

 

Do you have the mortgagee's permission to demolish their security property?

 

I'm not sure. I would assume so as they know of my intentions to demolish and build. I'll contact the broker. Thanks Terry

 

Hi @graydoh. Are you able to share which insurers you considered, and who you went with?

I've purchased a currently uninhabitable shed, and it'll be a long while before I get plans drafted, council approval and construction loan approval. Just researching what kind of insurance I should be looking into.

Cheers!

 

^^ Never mind, was advised by Comminsure I need something other than residential insurance (as the building is currently unlivable). Will call Insurance Council to get some pointers, if anyone spots this and has any ideas - suggest away please.

 

Try QBE, probably need commercial insurance if it is an investment and unlivable.

 

You have to be insured (or find another bank) and I am so glad to see that you are checking that with the broker. Never make assumptions with insurance/ mortgages, it can be costly.

 

Do a monthly payment schedule and cancel once property is demolished.

May pay to consult an insurance broker. I can put you on to a good one if you like?

 

My knowledge of insurance is minimal, but presumably it would be wise to have basic insurance in force to cover you against any third party claims. Yes, I know trespassers deserve what they get but if they injure themselves some clever lawyer will be coming after you.

 

Buzzkill

 

Has anyone thought to contact an insurer or broker?

Once the site is handed to the Principal Contractor, they have control of the site, responsilty for site security, WHS and must insure the works - what have you got in your building contract?

 

I'm not having much joy finding an insurer.

When I explain to them it's a utility building, on a small plot of land, not livable at the moment (and many many months away from being developed), and while it's a detached building it is part of a larger block of units ... the insurers who've taken the time to understand the scenario are all backing away from it. (I've spoken with Insurance Council, National Insurance Brokers Association, QBE, CGU, and a couple of brokers.) "Too old" "Not in good enough condition" "We only do residential / land lords" et

Sounds like @graydoh's situation was fairly close to mine, hopefully they'll duck back onto PC to share what they ended up doing.

 

Is the insurance merely to satisfy the lender ??
Do they know its uninhabitable and not being retained ?

If so then clearing the land and erecting a site fence may be sensible since insurers will see the site as vacant land with rubbish on it rather than a dwelling - Its not insurable. If someone enters the old house and is injured you may have a issue. If its cleared vacant land and fenced hard to see where negligence could go.

 

What is the relationship with the larger block of units? Is it on the same block, and perhaps the liability for the units will also pick up your piece of the pie? By your description you aren't looking to insure the builder, just want to cover yourself for liability situations?
Let me know if this is on track, there will be solutions to your problem either way.

 

Hi arja, sorry for the delay. I ended up purchasing home (building) insurance for the property through RAC, which was the cheapest policy I could find. This was enough to satisfy the bank's request. I upped my excess to as high as possible ($5000) so the premium was low - somewhere around $500. Insured it to the value requested by the bank - definitely worth nowhere near this amount. As per Scott no Mates above, I will be cancelling the policy once I have the bank's permission to demolish the house and get some of my annual premium back. As my empty run down house was freestanding it was a bit more straightforward than your scenario, but if the bank wants to see building insurance to cover themselves then I'd get any cheap policy to whatever value they ask for. Good luck!

 

Hi all. And thanks for coming back to update us @graydoh!

Initially I wanted the building insured just so I wouldn't be out of pocket if it disintegrated further due to wild weather or plumbing accidents from nearby homes. So no, insurance isn't a requisite of the lender.

But considering the condition it's in and the hesitancy of insurers, looks like liability might be a better way to go. While the corrugated metal roof is patchy and the heritage aspect brick wall is old - but nothing looks like it's going to drop on someone/their property. If in the worst case such a thing were to happen, would liability insurance cover me for such damage?

As I mentioned it's part of a larger block, but a detached and separate building. After investigations it turns out it has been excluded from the strata insurance policy (original developers were hoping to convert it quickly and didn't see value in insuring as-is).

As I'm in NSW will check in with the NRMA in the hopes they operate like RAC. If that's a dead end like the other building insurers I've spoken with I'll turn my attentions to researching liability insurance.

Keep the pointers coming - so helpful so far!