Property Insurance When Buying or Selling in Queensland: What You Need to Know

When buying property in Queensland, one important detail is often overlooked: when does the responsibility for insuring the property pass to the buyer?

Many buyers assume they only need insurance once settlement takes place. Under the standard REIQ contract, that's generally not the case.

When does insurance responsibility pass to the buyer?

Under standard REIQ contract terms, risk generally passes to the buyer at 5pm on the first business day after the Contract Date.

This can be weeks or even months before settlement.

For example, if you sign a contract on Monday and the property is damaged by a severe storm on Wednesday, you may already be responsible for that damage, even if the contract hasn't become unconditional and you haven't settled.

This is why arranging insurance should be one of the first things you do after signing a contract.

What should buyers do?

As a buyer, you should arrange appropriate building insurance as soon as possible after signing the contract, with cover commencing when your responsibility for the property begins.

Your policy should provide adequate cover for the property's replacement value and consider risks relevant to the location.

It's also worth checking relevant council flood and natural hazard information when considering your insurance needs.

If you're purchasing an investment property, speak with your insurer about whether landlord insurance is also appropriate.

What happens if the property is damaged?

If the property is damaged after risk has passed to you, the outcome will depend on the extent of the damage and the terms of your contract.

If the property is severely damaged and becomes unfit for occupation, you may have rights to terminate the contract in certain circumstances.

If the damage is less serious and the property remains habitable, you may still be required to proceed with settlement and make a claim through your insurance.

If damage occurs, don't make assumptions about your rights. Document the damage, notify your insurer and speak with your conveyancer before making decisions about the contract.

What about the seller's insurance?

Sellers should generally keep their existing insurance in place until settlement, even though risk may have already passed to the buyer.

If the property is damaged while under contract, the seller may also have obligations to take reasonable steps to prevent further damage. This could include securing the property or arranging temporary repairs.

Keeping insurance in place until settlement can help avoid unnecessary disputes and gaps in protection.

Can the contract change who carries the risk?

The parties can sometimes agree to special conditions that change the standard position on risk.

However, changing the usual arrangements can create complications around insurance coverage and responsibility if something goes wrong.

If you're considering changing the standard contract terms, it's important to obtain legal advice before signing.

A simple checklist

Buyers

·         Arrange building insurance as soon as you sign.

·         Check that the policy provides adequate replacement cover.

·         Make sure relevant risks are covered.

·         Keep your insurance active until settlement.

·         Notify your insurer and conveyancer immediately if damage occurs.

Sellers

·         Keep your insurance in place until settlement.

·         Take reasonable steps to minimise damage if something happens.

·         Notify the buyer promptly about significant damage.

·         Keep records of repairs or protective measures.

The takeaway

For Queensland property buyers, insurance is not something to leave until settlement.

Because risk can pass shortly after the contract is signed, arranging appropriate insurance early can protect you from potentially significant costs if the property is damaged during the contract period.

At Jet Legal, we can help you understand your contract and your responsibilities when buying or selling property in Queensland.

Buying or selling property?

This article is general information only and does not constitute legal or insurance advice. The timing of when risk passes depends on the terms of your contract. We recommend obtaining professional advice about your individual circumstances.