Building Insurance Before Settlement: What Victorian Buyers Actually Need

By Andrew Paterson

You have signed the contract of sale. Now your conveyancer or broker is telling you to sort building insurance before settlement. Fair enough, but the reasons why get muddled fast.

There are two separate things going on. One is legal risk. The other is your lender’s condition for releasing funds.

Get both straight and you settle on time. Miss one and you can delay a settlement over a document that takes ten minutes to arrange.

The two reasons this matters (they are not the same)

1. Legal risk. Who wears the loss if the property is damaged between contract and settlement.
2. Your lender’s settlement condition. The lender will not release funds without proof of insurance, whatever the legal position says.

Here is the part that trips people up in Victoria. Under the standard Victorian contract the vendor carries the risk until settlement. General condition 31.1 says it plainly: “The vendor carries the risk of loss or damage to the property until settlement.”

Yet your lender still will not fund without proof of cover. Both things are true at once, and the lender’s rule is the one that actually holds up your settlement.

Who carries the risk before settlement?

The old rule of thumb that risk passes at contract in most states is wrong, and it is especially wrong for Victoria.

Here is the position as it stands in 2026.

State / Territory	When risk passes to the buyer
VIC	At settlement (vendor bears risk until then)
NSW	At completion or possession, whichever comes first
QLD	5pm on the first business day after the contract date
WA	The earliest of full payment, settlement or possession
TAS	The earlier of possession or completion
NT	The earlier of full payment or possession
SA & ACT	At contract

One thing worth understanding about that table. Only NSW sets its position by statute, under section 66K of the Conveyancing Act 1919, and for a dwelling-house it cannot be contracted out of.

Everywhere else the default common law rule is that risk passes at contract, and the positions above come from the standard-form contract used in that state. That means a special condition can change them. An early-access clause is the common one: take possession of the property before settlement and you may be carrying the risk from that date.

So read the special conditions, and ask your conveyancer to confirm exactly when risk transfers on your contract.

Does the house need to be standing at settlement?

In the contract-risk states, broadly yes. Buy in South Australia and the house burns down after risk has passed, and you can still be compelled to complete.

Victoria is different. Section 34 of the Sale of Land Act 1962 (Vic) gives you a right to rescind if the dwelling is destroyed or damaged so it is unfit for occupation before you become entitled to possession.

The rules are specific:

• You give written notice within 14 days of becoming aware of the damage.
• The dwelling must be unfit for occupation, not just cosmetically damaged.
• The right cannot be contracted out of. Section 34(3) makes any clause trying to exclude it void.

There is a counter-right. Under section 36 the vendor can restore the damage, and if they do it before you become entitled to possession, your section 34 rescission right falls away and you are bound to complete. So it is not an automatic refund of your deposit.

This is why the vendor’s own insurance matters to you. If the vendor is uninsured and cannot reinstate, your position gets messier.

The Certificate of Currency: the document that gates your settlement

This is the piece nearly every buyer underestimates.

Home insurance is not legally mandatory in Australia. But virtually every lender makes building insurance a condition of releasing your loan funds, and the proof they want is a Certificate of Currency. No CoC, no release of funds, no settlement.

A CoC is a one-page summary from your insurer confirming the policy is active. Your lender needs to be named on it as interested party or mortgagee. That is the version people call a “noted” certificate.

What your CoC needs to show:

• The correct property address.
• A policy start date on or before your settlement date.
• A sum insured at or above the full rebuild value.
• Your lender named as interested party or mortgagee.
• The policy period clearly stated.

Then send it to your conveyancer and lender ahead of settlement, not on the day. Certificates are usually free but can take a few business days to issue. The delay is almost always someone leaving it late, not the insurer being slow.

A quick worked example

Say you buy for $688,000 with a 10% deposit, settling on a Friday. Legally the vendor carries the risk until that Friday. But your lender will not release funds without a CoC in hand.

So a fortnight out you arrange building cover with a sum insured that reflects the full rebuild cost, not the $688,000 purchase price. Rebuild cost is the materials and labour to reconstruct. Underinsure here and you carry the gap yourself.

You start the policy from the settlement date, name the lender as mortgagee, and send the CoC to your conveyancer three days early. Settlement proceeds without a hitch.

Sort it early and it is a non-event.

Buying an apartment or unit? The strata exception

If you are buying a lot in an owners corporation, the picture changes. In Victoria the correct term is owners corporation, or OC. “Body corporate” is the older term still used in Queensland.

The OC insures the building, not you. Under section 59 of the Owners Corporations Act 2006 (Vic) an OC must hold reinstatement and replacement insurance for the buildings on common property, and under section 60 it must carry public liability cover of at least $20 million. Two-lot subdivisions are exempt from both under section 7A.

So as a lot buyer you generally do not arrange separate building insurance. Instead you:

• Request the OC’s Certificate of Currency from the OC manager.
• Confirm it is current and covers the whole building for full replacement.
• Pass that certificate to your lender.
• Arrange your own contents insurance separately. The OC policy does not cover your belongings or internal fittings.

A useful safeguard sits in section 11 of the Sale of Land Act 1962. A vendor cannot sell an OC-affected lot unless the required insurance is in place, and if they do, you can avoid the sale any time before completion. Worth noting that this does not help in a two-lot subdivision, since no insurance is required there in the first place.

Check the OC certificate early. Chasing an OC manager during settlement week is nobody’s idea of fun.

Vacant land and new builds

Two situations where a standard building CoC does not apply.

• Vacant land. There is no dwelling to insure, so a lender generally does not require building cover at settlement.
• New construction. The builder’s policy covers the works during construction. You arrange your own building insurance once the home is complete and handed over, a step worth planning early if you are turning new-build dreams into reality.

Your broker and conveyancer will map out exactly when your own cover needs to start.

A simple timeline that keeps settlement smooth

1. At contract signing: start getting quotes. Do not wait for settlement week.
2. Around two weeks out: lock in a policy, set the start date to the settlement date, and name your lender as mortgagee.
3. Three or more business days out: request the CoC and send it to your conveyancer and lender.
4. For a strata purchase: request and check the OC certificate instead, and line up your contents cover.

Do that and insurance never becomes the reason your settlement slips. Insurance is only one line item at settlement, so it is worth reading it alongside the other costs of owning a home.

If you want a hand getting loan-ready without settlement surprises, that is what we do here at Aussiewide. Happy to talk it through and point you to an insurer who can turn a CoC around quickly.

This is general information, not personal advice. Your loan structure, insurance needs and eligibility depend on your own circumstances, so get advice tailored to your situation.

Frequently asked questions

Do I need building insurance for an apartment before settlement?

Generally no, not your own building policy. The owners corporation insures the building under section 59 of the Owners Corporations Act 2006 (Vic). You request the OC’s Certificate of Currency, confirm it is current and covers full replacement, and pass it to your lender. You still arrange your own contents insurance separately, since the OC policy does not cover your belongings or internal fittings.

What happens if the house burns down before settlement in Victoria?

Under the standard Victorian contract the vendor carries the risk until settlement. Section 34 of the Sale of Land Act 1962 lets you rescind by written notice within 14 days of becoming aware, if the dwelling is destroyed or damaged so it is unfit for occupation. But under section 36 the vendor can restore the damage before you become entitled to possession, which ends that right and leaves you bound to complete. So it is not an automatic refund.

When exactly do I need building insurance in Victoria?

Legally the vendor carries the risk until settlement, but your lender will not release funds without a Certificate of Currency. So arrange cover with a start date on or before settlement. In practice, get quotes at contract signing and lock the policy in about two weeks out.

What is a Certificate of Currency and why does my lender need it?

It is a one-page summary from your insurer confirming your building policy is active. It must show the correct address, a start date on or before settlement, a sum insured at full rebuild value, and your lender named as interested party or mortgagee. Lenders require it before releasing loan funds. No certificate means no settlement.

Does risk really pass to the buyer at contract signing?

Not in Victoria, where risk passes at settlement under the standard contract. In NSW it passes at completion or possession, whichever is first. In Queensland it is 5pm on the first business day after the contract date, and in WA, Tasmania and the NT it turns on possession, settlement or full payment, whichever comes first. Only South Australia and the ACT pass risk at contract. Special conditions can change any of these except in NSW, so check with your conveyancer.