Wellington Lawyers: Common Issues with Insurance
The resurgence of severe weather events has significantly impacted the insurability of residential properties, posing challenges for both the property and insurance industries. Recent months have seen some insurance companies tightening the scope of their coverage, making it crucial for potential buyers to secure insurance confirmation before making an offer on a property, particularly those at risk of flooding.
Common Issues with Insurance
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Cross-Lease Properties:
– Traditionally, insurance companies allowed owners of cross-lease properties, which share a vertical or horizontal wall, to insure their respective halves individually. Some insurers preferred to cover the entire property under one policy. However, it’s becoming more common for insurers to refuse to offer coverage at all. This may force owners to explore alternative options such as forming residents’ associations or converting to unit title or fee simple, which can be costly and unsustainable.
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Flood-Prone Areas:
– If a property is within a flood plain as determined by the local council, insurers may be hesitant to provide comprehensive coverage. It’s essential to thoroughly review the Land Information Memorandum (LIM) Report to check if the property is affected by flood risks.
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Mortgage Lending Requirements:
– During the property purchase process, many insurance policies may not meet the coverage extent required to secure mortgage lending. It’s crucial to read your insurance policy thoroughly to ensure it meets your lender’s requirements, typically found in your Loan Agreement. Generally, you will need to insure the building against loss or damage by fire or natural disaster.
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Accurate Sum Insured:
– Ensuring the “sum insured” (the maximum payout from your insurer) is accurate is vital for adequate coverage.
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Age of the Property:
– Older properties often have outdated electrical systems and wiring, which may increase the risk for insurers and affect insurability.
Key Takeaways
Before entering an unconditional sale and purchase agreement, ensure you can obtain insurance for the property. This means either securing insurance confirmation beforehand or making your offer conditional on obtaining insurance. Once the vendor accepts the offer, you have a binding contract, and if you haven’t protected yourself with a condition or arranged insurance, there is no second chance.
Seeking legal advice from a professional before entering into a sale and purchase agreement is always advisable.
Leading law firms, committed to helping clients cost-effectively, offer a range of fixed-price Initial Consultations to quickly help you understand your options. At Core Legal, our experienced team is ready to answer your questions and guide you on the right track.
Contact
Lawyer Masterton | Commercial Lawyer Wellington | Asset Planning Lawyer | Wellington Property Lawyer | Wellington Relationship | Property Lawyer
Address: Level 1,
109 Chapel Street,
Masterton 5840
Phone: +64 800 778 952