While cover notes aren’t issued in Australia anymore, there are other ways to get cover.
You’ve just bought your very own home – how exciting! But how should you approach insuring your home before the settlement date?
Cover notes were once used to provide individuals with preliminary insurance, but not anymore. Read on to learn about current alternatives.
Can I take out a cover note?
Cover notes are not used by insurance companies anymore. However, this doesn’t mean that you have to be left without cover. Cooling off periods are your best friend.
By law, every home insurance policy should have a cooling-off period. During this period, you can change any features of the policy, or even withdraw from the policy completely if you haven’t yet made a claim.
That way, if your circumstances change during your settlement period, you have no obligation to stick with a policy that doesn’t suit your needs.
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How long will the cooling-off period last?
In your insurance policy you will be given a cooling-off period of 21 days. This gives you protection while you continue to negotiate and finalise the legalities of your home purchase as well as allowing you to ensure that your current policy is the most ideal for your circumstances. If a claim is made during the cooling-off period you will be contractually obliged to the policy financially.
Do I need to get insurance before settlement?
While you aren’t legally obliged to take out home and contents insurance before your settlement date, it’s certainly a good idea to do so. Imagine if something were to happen to your property before you even moved in.
The extent of any property damage that occurs during this period will determine whether it negates the buyer's contract, or maintains the buyer’s legal obligation to go through with their purchase of the property.
Overall, it is more secure to purchase building insurance immediately and if necessary take advantage of the 21-day cooling-off period.
Why is insurance before settlement important?
While taking out insurance before settlement is optional for the buyer, the idea of taking out a cover note is a comforting one. It gives you that extra bit of protection without needing to rely solely on the seller’s building insurance.
If your soon-to-be home gets damaged before settlement, the contract to buy the property could be negated by the seller’s inability to produce the house in a reasonable condition.
However, there is a chance that your contract will be carried through, meaning that you will be contractually obliged to go through with the sale as well as having to handle the cost of repairs yourself.
It’s then of little surprise that having your own building insurance to assist in such circumstances is ideal.
Can I get insurance if the home is damaged?
Yes. If the home you're buying has seen better days it's still possible to get cover for it. However, any damage that happens to your property as a result of your pre-existing damage won't be covered. You will still be covered for unrelated events.
Make sure you inform your insurer that the property is damaged when applying as you could risk voiding your insurance otherwise.