Why You Need Insurance on Two Properties During a Move

You’re in the middle of a property chain, simultaneously selling your current home and buying a new one. 

It’s a complex dance of logistics and finances, and one question we often hear at Skilled Conveyancing is: 

“Why do I need to pay for insurance on both properties during the settlement period? It seems like double-dipping.”

This is a common point of confusion, but understanding the answer is critical for protecting your financial future. 

The requirement stems from two key principles: legal liability and contractual obligation.

The Property You Are Selling: Your Liability Until Settlement

Many homeowners mistakenly believe that their responsibility for their old house ends the moment they accept an offer. In reality, you remain the legal owner of the property until the settlement date is complete and the funds have been formally transferred.

Until that precise moment, the property is still legally yours. As the owner, you can be held liable for anything that happens to it. 

Consider these scenarios:

• A severe storm causes a tree on your property to fall, damaging the roof.
• A fault in the wiring causes an electrical fire.
• A pipe bursts, flooding the living room.

If any of these events occur before settlement, you, as the legal owner, are responsible for the damage. 

If the property is uninsured, you would have to cover the cost of repairs out of your own pocket or negotiate satisfactory terms with the purchaser for them to proceed to settlement.

This could drastically reduce the proceeds from your sale or, in a worst-case scenario, cause the buyer to pull out of the contract entirely, leaving you with a damaged property and a collapsed sale.

Your insurance policy should be maintained until settlement has been affected and is usually kept insured until the next business day.

The Property You Are Buying: A Contractual Obligation

The need to insure your new property is equally important and is typically driven by two powerful forces:

1. Your Lender’s Requirement: If you are taking out a mortgage, your bank will make it a mandatory condition once your loan has been approved. 

From their perspective, they are lending a substantial amount of money against an asset. They need to ensure that asset is fully protected from the moment they have a financial interest in it. 

All lenders will require evidence of insurance before they proceed to settlement. 

2. Your Own Financial Interest:  

Upon signing the Contract, you have an insurable interest in the property, and you should arrange for immediate cover on all improvements (once the Contract becomes unconditional).

Should the buildings on the property be destroyed or damaged prior to settlement, you may be able to rescind the Contract or make a claim through the insurer provided the policy be adequate.

It is strongly recommended that you arrange your own immediate insurance cover (from the day of sale or from the date the contract becomes unconditional) in the event the policy held by the Vendor is insufficient, has

lapsed, or is not renewed.

Insurance protects you from this catastrophic financial outcome.

The Overlap: A Short but Critical Period

This creates a short window – often just a single day – where you are legally responsible for two properties. 

While it may feel like an unnecessary cost for a 24-hour period, it is a non-negotiable part of a secure property transaction.

Think of it not as double paying, but as comprehensive risk management. 

The cost of overlapping insurance for a few days is negligible compared to the potential financial devastation of being uninsured for a major incident at either property.

At Skilled Conveyancing, we guide you through these crucial details to ensure a seamless and protected transition. 

Don’t leave your most significant assets exposed to unnecessary risk.

For a property transition managed with expertise and care, contact Skilled Conveyancing today on 03 9729 3512 or email us. 

We ensure every detail, from contracts to insurance, is meticulously handled for your peace of mind.