Insuring Before Property Settlement – What’s the risk?

It’s a common question when purchasing a property in Queensland: should you take out insurance on the property before settlement?

Why It Matters

Once you sign the contract to purchase a property – even before settlement – you often become legally responsible for risk of damage to the property.

When risk passes: In most Queensland contracts, risk transfers to the buyer at 5pm on the first business day after signing, not at settlement. This means any damage after signing may become your responsibility.

The seller may not be required to repair or insure against damage during this period. Even if such a requirement exists in the contract, relying on it could be risky.

Although the Property Law Act 1974 (Qld) previously allowed contract termination if the property became “unfit for occupation”, lesser damage might leave you obliged to proceed – unless you have your own protection in place.

 What Should You Do?

• As soon as the contract is signed, you face a real insurable risk.
• Don’t rely on the seller – or your financing lender – to protect you.
• Secure property insurance immediately to safeguard your investment.

Even in cases where you might have a right to cancel, having insurance could mean proceeding is still a sound decision.

To summarise:

• Risk transfer occurs shortly after contract signing.
• Only limited termination rights exist under extreme damage circumstances.
• Take out insurance immediately upon signing.

If you have any queries about insuring your property before settlement or any other aspect of property law, please contact the Argon Law property team.

More Information

• Property Law