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Do I need to buy home insurance before closing on a property?

Alex Ritchie avatar
Alex Ritchie
- 4 min read
Do I need to buy home insurance before closing on a property?

Having adequate home insurance can help manage risks from unforeseen events. But if you’ve not yet closed on a property, you may be wondering if, and when, you’re meant to purchase home insurance.

When to take out home insurance while purchasing property

Before submitting your full home loan application

Some home loan lenders may list having home insurance as a requirement for your application approval. If you were set on having your home loan with a specific lender, you may need to buy home insurance before closing on the property. 

If you’ve gained pre-approval from a lender and have found the property you want to purchase, now may be the time to consider buying home insurance to boost your chances of full mortgage approval. 

Keep in mind that even if you currently have a home loan without insurance, you may need to purchase this to qualify for a mortgage refinance from some lenders. 

When responsibility shifts

Another time it may be worthwhile for home buyers to consider purchasing home insurance when the responsibility for property damage shifts between the seller and the buyer. This may help to ensure there’s no gap in coverage at any time.

In some parts of the country, the seller may be responsible for damages only until the exchange of contracts. After that, it becomes the buyer’s responsibility. In other parts, the seller continues to be accountable until closing or settlement, when the balance of the price is paid, and the property legally transfers to the buyer. 

It’s important to read through the contract and speak with a conveyancer, solicitor, or lawyer to correctly understand the terms.

State or territory

Property damage responsibility shifts to buyer

New South Wales

At settlement or early occupation, whichever is first

ACT

From the exchange of contracts

Victoria

At settlement

Queensland

5pm, the first business day after the exchange of contracts

South Australia

From the exchange of contracts

Tasmania

From the exchange of contracts

Western Australia

The date the purchase price was paid, or the date the buyer is given possession of the property, whichever is first. 

Northern Territory

The date the purchase price was paid, or the date the buyer is given possession of the property, whichever is first. 

If you plan to purchase a home, your solicitor may ask you to buy home insurance before settlement, irrespective of when your state or territory says responsibility for damages passes on to you. This may be to better protect your interests and avoid any risk exposure. 

Do you need home insurance if you’re buying an apartment?

If you’re purchasing an apartment in a strata-managed building, building insurance is often covered by strata. This insurance cost would be split between all owners in the building and covered by your strata fees. 

It typically provides coverage for the building including common property like gardens and stairwells, and other items listed on the property’s title. However, it doesn’t cover your belongings or anything that’s not permanently attached to the building. You may want to look into contents insurance to cover these things. 

The bottom line

If you’ve decided you need home insurance, choosing the right policy may offer you peace of mind that your home is protected if the worst were to occur.

As a homebuyer, you may choose to err on the side of caution by getting home insurance before closing even if the seller’s insurance covers the property until settlement. You can also discuss the matter with your solicitor or conveyancer to pinpoint exactly when you need to buy home insurance during the sale process. 

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Product database updated 23 Jul, 2024

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.