Arranging insurance at time of purchase

Press, 29 May 1978, Page 13

Arranging insurance at time of purchase

Because a house is the most valuable thing in monetary terms that most of us will ever possess it is important for the buyer to have insurance cover on it immediately it legally becomes his proerty. If he reads the sale and purchase form used by the

Real Estate Institute the purchaser will find a clause regarding insurance.

This clause notes that from the time the contract becomes unconditional — usually a date before possession is given — the property will be at the risk of the purchaser with regard to “fire, tempest, earthquake or deterioration of any kind” except if there is negligence or* default on the part of the vendor.

Pending possession being given to the purchaser and providing he obtains the sanction of the insurance company concerned, and subject to the rights of any mortgage of the property, the clause mentions that the vendor will hold the existing policy or policies of insurance in trust for the vendor and purchaser according to their respective interests and rights.

Particulars of the policy or policies are to be recorded in a space provided on the form. Provision is made in the insurance clause for additonal terms to be added about insurance cover to

provide for the event of fire or other damage occurring while the property is at risk of the vendor, although the purchaser is bound to complete the agreement. The terms should be drafted to suit individual requirements. The insurance company which has issued the ven-

dor’s policy may not recognise the purchaser unless it is advised of the change in ownership and has accepted the altered conditions.

If the purchaser has any doubt about the continuance of the vendor’s insurance cover in a manner providing for the interests of the purchaser he has the option of arranging a new cover to become operational immediately the agreement becomes unconditional.

If the property is mortgaged, the mortgagee will hold the policy documents along with the title deeds until the loan is repaid. The mortgagee may even nominate the insurance company through which he desires to deal.

The important thing is that it is the purchaser’s responsibility to make certain that his own interests are protected from the very beginning.

LOOKING AT REAL ESTATE By the Real Estate Institute