The risk question. When you buy a property there is a gap — often weeks — between the day the contract is signed and the day it settles. If the property is damaged during that gap (fire, storm, flood, vandalism), someone has to bear that loss. “Risk” is the legal shorthand for who carries that exposure. The critical point buyers miss is that the moment risk shifts to you is not the same in every state, and in one state (QLD) it happens far earlier than most people expect.
When risk passes, by state
| State | When risk passes to you | Who bears it until then | If it's damaged before then |
|---|---|---|---|
| QLD | 5pm on the first business day after the contract date | You, almost immediately — so insure on signing | You generally must still settle unless the home is unfit for occupation |
| NSW | At settlement (or earlier if you take possession) | The vendor | The price may be reduced; for substantial damage you can rescind within 28 days of discovering it |
| VIC | At settlement (or on early possession) | The vendor | The vendor must hand it over in the same condition; you may have rights to rescind or adjust |
Whatever the state, if you take early possession risk shifts to you at that point — and either way, arrange your own building, contents and public liability cover on signing, because your lender will require it before releasing funds.
Why you can't rely on the seller's insurance. Even where the seller technically bears risk until settlement, you should not depend on their cover. The seller may not actually hold insurance, may have cancelled it, the loss may fall outside the terms of their policy, or other factors may prevent you recovering under it. If something goes wrong and the seller's insurer declines, you can still be bound to complete the purchase.
What insurance to arrange, and when. For a standalone house you will generally want building insurance (usually required by your lender before it releases settlement funds), plus contents and public liability cover. The consistent professional advice across states is to put this cover in place immediately on entering the contract — before the property is at your risk — so there is never a window where you are exposed and uninsured.
Strata and community-title properties. Where you are buying into a strata scheme, apartment block or body corporate, the owners corporation / body corporate typically insures the building structure, common property and public liability for common areas, with the cost shared between lot owners. In that case you generally only need to insure the interior of your lot, your contents and public liability for your own interior spaces. For low-rise developments (e.g. townhouses) the split depends on whether the buildings share common walls.
Condition and inspections. In every state the buyer takes the property in its existing condition, subject to fair wear and tear. Your main protection against condition problems is to inspect thoroughly (and commission building/pest reports) before you are bound, not after.
