Insurance: What You Should Know

What happens if you're buying a home and it's damaged in a hurricane or by fire before the closing date?

If the seller has the appropriate insurance, will the home be covered during the transfer of ownership?

These are valid questions to consider.

There is a time gap between the contract signing for the sale of a home and the completion date when the property is registered in the buyer's name.

During this “limbo” period, the buyer and seller could be at risk.

At least one Bahamian insurer provides the following benefit under its standard home insurance policy:

Insurance When Your Home is Being Sold

“If you contract to sell your home, the purchaser who completes the sale shall have the benefit of the insurance provided by this cover up to the date of completion, provided the building is not otherwise insured.”

In effect, this offers the buyer the benefit of the sellers insurance until the sale is completed.

It's important to remember that the limits on the sellers insurance still apply. For example:

Jack sells house to John for $500,000. Jack only has the house insured for $200,000 when it should have been insured for $400,000. If the house is damaged during the “limbo” period, the maximum benefit that John could claim would be $200,000. The key point is that the buyer should not over rely on the sellers insurance.

Make sure you discuss the matter with your lawyer and insurance agent before going to contract, particularly now that we're in the hurricane season

Take steps to ensure that adequate insurance is in place in your name during the “limbo” period to protect your Bahamas real estate.

The onus is on both parties to make certain that proper insurance is in force. Once a contract is signed the buyer acquires an “insurable interest” in the property.

* Your leading Bahamas real estate source.