If you’re a first home buyer and your parents are guiding you through the process, they might have mentioned the importance of a home insurance cover note. But if your parents – or whoever is advising you – haven’t purchased a property recently, they may not have noticed that home insurance cover notes aren’t as prevalent as they once were.
Here, we investigate where home insurance cover notes have gone and what buyers should be doing instead.
- What is an insurance cover note?
- Can I get a home insurance cover note online?
- Can I get one at all anymore?
- What should buyers do?
What is an insurance cover note?
A home insurance cover note is a form of temporary insurance. Cover notes used to be common and were offered by most insurance companies when you applied for a home insurance product. The cover note meant that you were covered by this temporary policy until you were issued with a full policy by the insurer.
Policy owners sometimes used the period of the cover note for peace of mind while shopping around for a better deal, which often meant that the provider of the cover note missed out on the full policy and premium.
Can I get a home insurance cover note online?
Recently we were informed by real estate agents that insurance companies are not offering cover notes and that trying to obtain a cover note prior to settlement by a purchaser is no longer the norm.
It seems that cover notes have been replaced by a cooling-off period when you take out a home insurance policy. The cooling-off period means the purchaser of the policy can cancel with a full refund of their premium within a specified time frame.
So I can’t get a cover note for house insurance at all now?
We contacted four insurers and one insurance broker to confirm the latest position of suppliers. All insurers stated that they do not issue home and/or contents insurance cover notes but rather provide a full policy to the client. The client is charged full payment for that policy with the opportunity to cool off up to 21 days following payment.
Others provide the same cooling off period of 21 days but additionally allow the client 14 days to make the payment. This effectively provides them with 5 weeks from policy issue to potential cancelation because the 21-day cooling-off period begins when payment has been made.
So, what should buyers do?
In South Australia, most contracts state that the property is at the risk of the buyer from the moment the contract is signed. This means that if the property is damaged between the contract date and settlement, even if it’s accidental damage, the purchaser cannot pull out of the contract and must buy the damaged property (with no reduction in price). Instead, it is likely that the purchaser’s insurer will cover the repairs for the damage. An exception to this is if the property is damaged by the seller on purpose or by them not taking action to stop the damage.
It is also important for a buyer to be insured for public liability in case a tenant or occupant of the property is injured between the contract date and settlement. Even though the seller will usually still have an insurance policy in place until settlement, we strongly advise that the purchaser take out insurance so that they can make a claim in the event that something goes wrong.
In fact, our conveyancers‘ general advice to all of our purchaser clients is to take out cover immediately when they sign a contract to buy a property – even before cooling off has expired in the case of a private treaty sale. With the very generous cooling off provisions, there is simply no reason not to.
If you have any questions, don’t hesitate to contact the experience team at Eckermann Conveyancers on 08 8366 7900.