With Wellington’s biggest market player restricting access to new insurance, securing home and contents insurance in the city is set to become a more complicated process.
Mortgage advisers say homebuyers will need to budget carefully, and should prepare to shop around for an insurer willing to cover a home in a high-risk area. According to David Graves, Founder and Director of real estate company Tall Poppy, buyers will now need to consider four key things before buying or selling.
He says buyers need to start looking at insurance options immediately and ensure they have an insurance clause in any Sales and Purchase Agreement, and urges them to seek legal advice before signing anything.
Sellers should ensure that any agreement they sign is subject to the buyer getting the appropriate level of insurance cover, and should also speak to a lawyer or a broker before signing an Agreement.
Sellers who have accepted any type of offer should double check their insurance position with a lawyer or broker, and buyers have made offers that have gone unconditional should do the same.
Graves says private insurance is vital for Wellington, as the Earthquake Commission (EQC) is limited in the amount that it can pay out.
“EQC’s exposure on buildings is limited to $100,000, so private insurance is required (land exposure is uncapped),” Graves said. “If a buyer can’t obtain appropriate insurance cover, it’s unlikely they will be able to secure mortgage finance and a Sales and Purchase Agreement may not be finalised.”
“Working with an insurance broker can help you navigate the current insurance landscape, and also check in with your bank to see if any options are available,” he explained. “If you’re uncertain about anything to do with insurance, you should contact your lawyer or salesperson to work through any potential issues.”