Many investors think that they don't need to insure their property until they have the keys to their new property in their hands.

Wrong!

Just whose responsibility it is should some disaster does befall your new home during the settlement period is very much a grey area.  

While many purchasers don't insure their properties until they take possession, I have always recommended that insurance be taken out on the day of signing the contract to purchase your property or at the latest when the contract to purchase becomes unconditional.

While you would logically point the finger at the vendor, particularly if a fire occurs while they are still living in the house, some insurance companies may not agree with this and if you haven't covered your bases and taken out your own policy, look out!

This was reinforced a while ago when a Victorian purchaser bought a home on an unconditional contract but did not arrange insurance until settlement.

The property burnt down two weeks prior to settlement and an 18 month court battle ensued. The property could not settle during this time and the purchaser had already sold his previous home.  This meant that both the vendor and the purchaser had to live in rented accommodation for 18 months.

When the case eventually got to court, it was determined that the purchaser was liable for 50% of the loss due to his vested interest in the property.  The vendor's insurance company paid 50% of the rebuilding cost of the property.

This meant the purchaser was out of pocket for the purchase price as well as 50% of the rebuilding cost plus his accommodation costs for the period. 

You can now see why I recommend that purchasers protect their interests immediately upon signing a contract to purchase a property by obtaining building insurance.

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