The Most Costly Mistake Homebuyers Can Make: Are You Protected?

When you’ve just signed a contract of sale for a property, it’s tempting to think that the major hurdles are behind you. However, one crucial step that should not be overlooked is organising a covernote of insurance. Here’s why this is so important:

Risk Shifts to the Buyer Upon Signing

- Immediate Responsibility: The risk associated with the property often transfers to the buyer the moment the contract is signed.
- Financial Liability: If the property is damaged or destroyed after the contract is signed but before settlement, the buyer could be held financially responsible.

What Is a Covernote?

- Temporary Coverage: A covernote is a temporary insurance document that provides proof of coverage while your full insurance policy is being finalised.
- Interim Protection: This ensures that you are protected during the critical period between signing the contract and the final settlement.

Why Timing Is Critical

- Protection Against Unexpected Events: Without a covernote, you might be exposed to significant financial risk if an unexpected event, such as a fire or natural disaster occurs.
- Standard Policy Exclusions: Many standard home insurance policies won’t cover events that happen before the policy is officially in place.

Lender Requirements

- Proof of Insurance Needed: Lenders often require proof of insurance before they will release funds for the purchase.
- Avoid Settlement Delays: A covernote ensures that the lender is confident that the property is protected, helping to avoid delays in settlement.

As soon as you sign the contract, arrange for a covernote to secure your investment. This early action protects you from financial risk and ensures that your lender’s requirements are met, allowing for a smooth and timely settlement process. Ask our Finance division for more details!