Understanding the Insurance Embargo in QLD: A Nightmare for Recent Property Buyers

If you’ve recently signed a property contract in Queensland, especially in flood-prone areas like Townsville, you might be in for a rude shock. In QLD, once you sign a property contract, the insurance responsibility shifts to the buyer. This means that if anything happens to the property after signing but before settlement, you—the buyer—are responsible for rectifying the issue or claiming insurance.

The Nightmare of Insurance Embargo.

The current situation in Townsville is a perfect storm for homebuyers. With significant rainfall, road closures, flood warnings, and evacuations in the so-called ‘black zones,’ insurance companies have placed a hold on providing new policies or quotations—this is known as an insurance embargo. This means that if you’ve recently signed a property contract and are now looking for insurance, you may find yourself completely stuck.

Buyers are understandably panicking. No insurance means no protection against damage, which is a huge risk in such extreme weather conditions.

How to Tackle the Insurance Embargo

While the situation is frustrating, there are some potential solutions to consider:

1. Include a Clause in the Contract: Before signing the contract, negotiate a clause that ensures the seller remains responsible for insurance until the embargo is lifted and you can secure an acceptable policy from a reputable insurer. This could save you from unnecessary risks.
2. Approach Your Bank for Insurance: If you’re financing the purchase through a bank, they might offer you insurance as a requirement for the loan. While this option is typically more expensive, banks cannot outright deny you coverage since they have a vested interest in protecting the asset.
3. Work with an Insurance Broker: Brokers may be able to find policies that insurers don’t openly advertise. However, it is highly unlikely that any policy obtained during the embargo will include flood coverage for the first 30 days. Despite the limitations, having some coverage is better than none.

Recommendation

The best course of action is to negotiate the insurance responsibility clause in your contract before signing. If that’s not possible and you’re caught in the embargo, reach out to a broker and secure any available insurance—even if it’s expensive. Once the settlement is complete and the embargo is lifted, you can switch to a more favourable insurance provider. Many companies allow cancellations and offer refunds for the remaining premium if an annual payment was made.

Final Thoughts

The insurance embargo in QLD, especially during flood events, is a serious issue that can leave buyers exposed to significant financial risk. Being proactive and understanding your options can help you navigate this challenging situation. If you’re planning to buy a property in a high-risk area, always factor in the potential for an insurance embargo before signing the contract.

Stay safe, and plan wisely!