Do I need home insurance before settlement?
If you’re in the process of purchasing a property, then one big question on your mind might be ‘do I need home insurance before settlement?’

If you’re in the process of purchasing a property, then one big question on your mind might be ‘do I need home insurance before settlement?’
KEY POINTS
- You aren’t always required to take out home insurance on a property, though you may choose to do so for your own peace of mind.
- Your mortgage lender may require you to take out home insurance as a condition of the mortgage, eight from the contract date or the settlement date, depending on your state or territory.
- The cost of home insurance may be affected by the value of your property and its contents, among other factors.
Do you need home insurance before settlement?
It is not a legal requirement to have insurance when buying a house (unlike buying a car), but you may want to purchase it for your peace of mind, or at your lender’s request.
Your lawyer or conveyancer may recommend that you take out insurance when you exchange signed copies of the contract with the seller. Even if the seller’s insurance covers the property until settlement, this might still be worth also taking out your own policy to protect your interests, and in case the seller does not have adequate insurance in place.
It may also be a condition of your home loan that you take out home insurance. For example, your lender may require you to take out building insurance that is effective from the date you sign the contract or before the loan becomes unconditional. Check with your home loan provider to see if this applies to you, and from what point your home needs to be insured.
If you are buying a strata title apartment, you typically will not need to purchase building insurance as it will be covered by residential strata insurance. The cost of this cover is usually included in your building levies. However, you may still want to take out contents insurance to cover your belongings.
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When do you become responsible for damage to a property?
The point at which a home buyer becomes responsible for damage to a property can vary depending on which state or territory you live in and your particular contract of sale. Each state has its own standard position as to when the risk of damage to the property normally passes from the seller to the buyer.
In most parts of the country, this will either be when the buyer and seller exchange signed contracts, or at settlement, which is when ownership of the property transfers from the seller to the buyer and the buyer pays the balance of the sale price.
Here are the standard positions at which you will typically need to take out insurance around Australia:
In the Australian Capital Territory, the buyer is responsible for damage to the property as soon as contracts are exchanged.
- In New South Wales, the buyer is responsible for damage to the property on settlement.
- In the Northern Territory, the buyer is responsible for damage to the property on either the date the whole purchase price is paid or the date the buyer is entitled to or is given possession of the property (whichever comes first).
- In Queensland, the buyer is responsible for damage to the property from 5pm the next business day after the contract date (this is before settlement).
- In South Australia, the buyer is responsible for damage to the property as soon as contracts are exchanged.
- In Tasmania, the buyer is responsible for damage to the property as soon contracts are exchanged.
- In Victoria, the buyer is responsible for damage to the property on settlement.
- In Western Australia, the buyer is responsible for damage to the property on either the date the whole purchase price is paid or the date the buyer is entitled to or is given possession of the property (whichever comes first).
Your contract of sale may be different to this and may pass the risk to you (the buyer) at a different time. It’s important to check your contract and speak to your solicitor or conveyancer to see what applies to you.
What does home insurance cover?
Home insurance covers your home if it is damaged or destroyed due to an ‘insured event’. Cover will vary between insurers, but it generally covers events such as:
- Fire
- Theft
- Storm
- Earthquake
- Explosion
- Impact damage (such as from a car or a falling tree)
- Escape of water (such as from a burst pipe)
- Vandalism and riot
Additionally insurers may offer benefits such as legal liability cover if someone is injured or their property is damaged at your home, and temporary accommodation if your property becomes unliveable because of an insured event.
As your household’s needs and financial goals may be different to the next person’s, it’s important to consider comparing home and/or contents insurance options before taking out a policy.
What types of home insurance are there?
You may have the option of taking out either a ‘sum-insured’ or a ‘total replacement’ home insurance policy.
Sum-insured cover is when you provide an estimate of how much it would cost to rebuild your home if it was totally destroyed. It’s important to carefully consider how much to insure your house for, as a higher estimate may raise the price of your premiums, though a lower estimate could mean risking being underinsured when you need it most.
Total replacement cover insures you for the total cost of repairing or rebuilding your home to the same standard, no matter how much prices may have changed since taking out the policy. According to Moneysmart, not many insurers in Australia offer total replacement cover and it is typically more expensive.
What is home and contents insurance?
The term ‘home and contents’ insurance refers to two different types of insurance that are commonly bundled together. While home insurance covers the structure of your home, contents insurance can be taken out to cover your personal possessions, which can be anything from clothing and electronics to carpets in your home.
It is possible to purchase either home or contents insurance separately, but many insurance providers sell them together, and may offer a discount if you take out combined cover. While contents insurance is optional, taking it out may provide you with peace of mind that your belongings are covered in the event of loss or damage.
How are home insurance premiums calculated?
Factors affecting your home insurance premiums can include:
- Your home’s age, construction materials and location
- The sum insured value, with higher sums typically leading to higher premiums
- Your selected excess, with a lower excess usually meaning higher premiums, and vice versa
- Whether you have combined insurance or just home or contents insurance
- The value of your contents, if you also have contents insurance
- The people in your household, including their ages and claims history
Does the location of your home affect your home insurance policy?
The area in which your home is located can affect the cost of your home insurance premiums. For example, if you live in an area that is prone to natural disasters or flooding, or is known for high crime rates, insurance providers may take this into account when calculating your premiums, making them more expensive.
Cover image source: fizkes/Shutterstock.com
This article was reviewed by our Finance Editor Jessica Pridmore before it was updated, as part of our fact-checking process.

- Do you need home insurance before settlement?
- When do you become responsible for damage to a property?
- What does home insurance cover?
- What types of home insurance are there?
- What is home and contents insurance?
- How are home insurance premiums calculated?
- Does the location of your home affect your home insurance policy?
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