Buying a property is a major financial commitment, and insurance is an important part of protecting that investment.
Two questions buyers commonly ask are:
“When should I arrange building insurance?”
and
“Do I need title insurance?”
These are two very different types of protection.
Building insurance generally relates to physical damage to the property, while title insurance can provide cover for certain risks affecting ownership or interests in the property.
Understanding when to arrange insurance and what each policy covers can help you avoid an unpleasant surprise after settlement.
When Should I Arrange Building Insurance?
As a buyer, you should consider your insurance arrangements before settlement, rather than waiting until you collect the keys.
The exact point at which responsibility for risk passes from the seller to the buyer can depend on the Contract of Sale and the circumstances of the transaction.
Your conveyancer can explain the relevant contractual position for your purchase.
If you are obtaining finance, your lender may also have specific insurance requirements that need to be satisfied before settlement.
Why Should I Arrange Insurance Early?
Waiting until settlement day to organise insurance can create unnecessary risk.
For example, you do not want to discover on settlement day that:
- Your insurer needs additional information
- The property cannot be insured under the policy you selected
- The lender requires evidence of insurance
- The policy has not commenced
- The property has an issue affecting the insurer’s assessment
Arranging your insurance early gives you time to resolve any problems before settlement.
What Does Building Insurance Generally Cover?
A building insurance policy may cover certain physical damage to the building, depending on the policy.
Depending on the policy, cover may relate to events such as:
- Fire
- Storm damage
- Certain water damage
- Impact damage
- Other insured events
The exact cover, exclusions, excess and conditions depend on the policy.
You should read the policy carefully rather than assuming every type of damage is covered.
What About an Apartment or Unit?
If you are buying an apartment or unit, building insurance arrangements can be different.
The Owners Corporation may have insurance arrangements covering the building or common property.
This means you should not automatically assume that you need to arrange a separate building insurance policy for the entire building.
However, you may still need insurance for your individual circumstances, such as contents and other risks.
Check the relevant Owners Corporation information and your insurance requirements before settlement.
You can also read our article about Owners Corporation to understand more about buying property that is affected by an Owners Corporation.
What Is Contents Insurance?
Contents insurance is different from building insurance.
It generally relates to your belongings and personal property rather than the physical building itself.
For example, depending on the policy, contents insurance may cover items such as:
- Furniture
- Electrical appliances
- Clothing
- Personal belongings
If you are buying a house, you may need to consider both building and contents insurance.
What Is Title Insurance?
Title insurance is a different type of insurance.
Instead of primarily covering physical damage to the property, title insurance can provide protection against certain risks affecting ownership or interests in the property, depending on the policy.
Potential risks may include certain:
- Title defects
- Fraud or forgery
- Unknown encumbrances
- Registration issues
- Planning or property-related risks
- Other matters specifically covered by the policy
The actual coverage depends entirely on the policy wording.
Is Title Insurance Compulsory?
Title insurance is generally not compulsory for every property purchase.
Whether you want to obtain it is a decision you should make after considering the property, the risks identified during the conveyancing process and the terms of the policy.
If you are considering title insurance, read the policy carefully and understand what is and is not covered.
Do I Need Title Insurance?
There is no universal answer.
Some buyers may decide that the additional protection is worthwhile, while others may decide that they do not need it.
The decision may depend on factors such as:
- The type of property
- The property’s history
- Whether unusual title issues have been identified
- The nature of the transaction
- The cost of the policy
- The exclusions and limits of cover
Your conveyancer can help identify title and property issues discovered during the conveyancing process, but insurance advice should be obtained from the insurer or an appropriately qualified insurance professional.
Does Title Insurance Replace Conveyancing?
No.
Title insurance should not be treated as a replacement for proper conveyancing.
A conveyancer reviews the Contract of Sale, Vendor Statement and relevant property information and assists with the legal and settlement aspects of the transaction.
Insurance provides a separate layer of protection under the terms of an insurance policy.
It is important to understand the difference.
What Should I Check Before Buying Insurance?
Before arranging insurance, consider checking:
The Type of Property
A house, apartment, townhouse, vacant land and commercial property may have different insurance considerations.
The Contract
Check the Contract of Sale for provisions relating to risk, insurance and the property.
The Owners Corporation
If you are buying a property affected by an Owners Corporation, check what insurance arrangements are already in place.
Your Lender’s Requirements
If you have a mortgage, your lender may have specific insurance requirements.
The Policy Exclusions
Do not only look at what the policy covers. Pay attention to exclusions, limits, excesses and conditions.
When Cover Starts
Make sure you know the commencement date and time of your policy.
What Happens If the Property Is Damaged Before Settlement?
If the property is damaged between signing the Contract of Sale and settlement, do not assume that you automatically have to proceed without options.
The Contract of Sale and the applicable legal provisions will determine the position.
Notify your conveyancer as soon as possible if you become aware of significant damage before settlement.
Your conveyancer can review the circumstances and explain what steps may be available.
What If I Am Buying an Investment Property?
If you are buying a property that will be rented out, your insurance requirements may be different from an owner-occupied property.
You may need to consider:
- Landlord insurance
- Building insurance
- Contents insurance, where applicable
- Loss of rent cover
- Liability cover
Speak with your insurer about the appropriate cover for your intended use of the property.
What If I Change the Use of the Property After Settlement?
If you initially intend to live in the property but later decide to rent it out, you should review your insurance arrangements.
An owner-occupied policy may not provide the same cover as a landlord policy.
You should also consider whether the change affects your:
- Home loan arrangements
- Tax position
- Council requirements
- Land tax
- Other obligations
Do not assume that your original insurance policy will automatically continue to cover the property after its use changes.
Common Insurance Mistakes Buyers Should Avoid
Waiting Until Settlement Day
Arrange your insurance early enough to make sure everything is ready.
Assuming Building and Contents Insurance Are the Same
They generally cover different things.
Assuming Apartment Owners Need Their Own Building Policy
Check the Owners Corporation’s insurance arrangements first.
Assuming Title Insurance Covers Everything
Every title insurance policy has exclusions, conditions and limits.
Treating Title Insurance as a Replacement for Conveyancing
Insurance and conveyancing perform different functions.
Forgetting to Update Insurance After Renting Out the Property
Changing from owner-occupied to investment use may require different insurance.
Frequently Asked Questions
When should I arrange building insurance?
You should consider your insurance arrangements before settlement and confirm when cover should commence based on your contract and circumstances.
Is building insurance compulsory?
The requirements can depend on the property, contract and lender. Your lender may require evidence of appropriate insurance before settlement.
Do I need building insurance for an apartment?
The Owners Corporation may have building insurance covering the building or common property. Check the relevant arrangements before taking out separate building insurance.
Is title insurance compulsory in Victoria?
Generally, title insurance is not compulsory for every property purchase. It is an optional insurance product that may provide protection against certain risks depending on the policy.
Does title insurance replace a conveyancer?
No. Title insurance and conveyancing serve different purposes.
What happens if the property is damaged before settlement?
The Contract of Sale and applicable legal provisions will determine the position. Contact your conveyancer as soon as possible if significant damage occurs.
Do I need different insurance if I rent the property out?
You may. If the property’s use changes from owner-occupied to rental, review your insurance arrangements with your insurer.
How Prox Conveyancing Can Help
At Prox Conveyancing, we help Victorian buyers understand the conveyancing and settlement aspects of their property purchase.
We can review the Contract of Sale and relevant property information and explain matters that may affect your transaction, including issues relating to settlement and property ownership.
If you are unsure about your insurance obligations or whether a particular insurance policy is suitable for you, you should also speak with your insurer or an appropriately qualified insurance professional.
Planning your insurance arrangements before settlement can help ensure you are prepared when you become the owner of the property.
About the Author
Meet Sally
Sally Kwok is a Licensed Conveyancer and the Director of Prox Conveyancing. With more than 16 years of experience in the conveyancing industry, she is committed to helping buyers and sellers navigate Victorian property transactions with confidence. Sally is passionate about providing clear communication, practical guidance and personalised service throughout every stage of the conveyancing process.
👉 Learn more about Sally on our About page.
About Prox Conveyancing
Prox Conveyancing is a Victorian conveyancing practice providing professional conveyancing services for residential property transactions across Victoria. We assist buyers, sellers, investors and families with a wide range of conveyancing matters, delivering personalised service, transparent communication and professional support from contract through to settlement.
👉 Learn more about Prox Conveyancing on our About page.
This article provides general information only and is not legal advice. Every property transaction is unique, and the information above may not apply to your particular circumstances. If you require advice about your specific situation, please contact a qualified legal professional or licensed conveyancer.