Have You Got Insurance Sorted? Important Considerations For Sellers And Buyers In Light Of Recent Earthquakes

A buyer made an unconditional offer on a property, and a few days later a substantial earthquake occurred affecting large parts of New Zealand. 

The buyer called an insurance company to arrange insurance cover from the settlement date, and was surprised to discover that they were not prepared to take on any new customers in the meantime.  She rang several other insurance companies and all advised her the same.

Getting quite worried, the buyer saw her legal advisor urgently.  They contacted the seller’s lawyer, and were able to arrange for the seller’s existing insurance policy to be assigned to the buyer at settlement. 

The recent earthquakes have made insurance a topical issue, and there are some important considerations to bear in mind during the buying and selling process.

Notional EQC claim

Before settlement, sellers should lodge a “notional” claim with EQC for any potential damage that might arise, noting that not all earthquake damage can be seen from a visual or non-invasive inspection. 

This means that the property address is registered on EQC’s system and the seller is given a claim number which can be assigned to the buyer at settlement if agreed.  If it turns out after an inspection that there is no damage to the property, the claim is simply not pursued any further.

Some agreements for sale and purchase may now include a clause to this effect.  In any event, you should see your legal advisor before signing an agreement to make sure this issue is adequately taken care of.

Seller’s insurance assigned

Many buyers are worried about insurers not taking on new customers, and the impact this may have on their ability to purchase.

At present some but not all insurance companies are allowing sellers to assign their policies to buyers. This will involve paperwork to complete the assignment, and you should seek legal advice before signing.

Buyers should make their offers conditional upon obtaining satisfactory insurance, and then begin investigating insurance options as soon as possible after their offer is accepted.

If you are a buyer or a seller and are worried about the insurance implications for you, see your legal advisor as soon as possible.