Buying or leasing rural property: insurance checks before you commit

Buying or leasing rural property can change what needs to be insured, who is responsible for it and when cover should begin. These are questions worth addressing before you sign.

Whether you’re buying your first farm, adding another block or leasing extra country, it’s important to understand the property and its insurance requirements before committing.

Understand what you are taking on

Start by confirming what is included in the purchase or lease and which assets you will be responsible for insuring.

Some areas to check include:

• Buildings and improvements. Review the age, construction materials and condition of sheds, residences, workshops and other structures. Unapproved building work or known defects may affect the insurance arrangements available.
• Water infrastructure. Bores, pumps, tanks, troughs and irrigation systems can be costly to replace. Check which assets are included in the transaction and how they would be insured.
• Fencing and yards. Boundary fencing, internal fencing and livestock handling facilities may represent substantial replacement costs. Insurance limits and conditions can vary between policies.
• Existing damage and maintenance. Document the property’s condition before taking possession. Existing damage, deterioration and maintenance issues may affect cover and future claims.

If you’re leasing rather than buying, read the lease carefully.

The agreement may make you responsible for insuring certain buildings, improvements or other property, as well as maintaining liability insurance.

Clarify these obligations before signing and ensure the proposed insurance arrangements reflect them.

Check the property’s claims and risk history

A property’s location, condition and previous exposure to damaging events can influence the insurance options available.

Before committing, ask:

• Has the property experienced flooding, bushfire, storm damage or other significant events?
• Are there known issues with buildings, electrical systems, roofing or other improvements?
• Are there flood, bushfire or other natural hazard exposures that warrant further investigation?
• Are previous inspection reports, relevant repair records or other property information available?

Where appropriate, review available hazard mapping and obtain suitable property inspections.

A previous claim or exposure does not automatically mean insurance will be unavailable. However, insurers may require further information or apply particular conditions.

Identifying these matters early allows time to discuss them with your broker before the purchase or lease proceeds.

Review sums insured and asset values

The price paid for a property is not necessarily the amount needed to insure its buildings and improvements.

For buildings insured on a reinstatement or replacement basis, the sum insured should reflect the applicable rebuilding costs. Depending on the policy, relevant expenses may include demolition, debris removal and professional fees.

Other assets may be treated differently.

Consider:

• Machinery and equipment. Check whether settlement is based on replacement cost, market value, agreed value or another basis specified by the policy.
• Farm infrastructure. Fencing, water systems, yards and other improvements may have separate insured amounts, limits or conditions.
• Farm contents and stored produce. Check how tools, materials, hay, grain and other property are classified and valued.
• Existing valuations. A valuation or sum insured used by the previous owner should be reviewed before being relied upon.

The appropriate values depend on the policy wording and the assets being insured.

For further information, see our article on underinsurance and business sums insured.

Confirm when insurance needs to commence

One of the most important questions is when responsibility for the property passes to you.

This is not necessarily the settlement date.

The timing can vary depending on the contract and the state or territory in which the property is located.

Before signing, ask your solicitor or conveyancer to confirm when the risk of loss or damage transfers under the contract.

Then discuss the required insurance commencement date with your broker.

For a lease, check when your contractual insurance obligations begin. This may be linked to the commencement of the lease, handover or another agreed date.

Also confirm:

• The correct legal entities and insured interests are recorded.
• Any lender or financier requirements have been considered.
• The proposed policy reflects the property, activities and assets requiring insurance.
• Cover has been accepted by the insurer and the commencement date has been confirmed.

Do not assume the previous owner’s insurance will protect your interests.

“The insurance start date should reflect your contractual responsibilities, not an assumption that everything begins at settlement.”

Consider liability exposures

Owning, leasing or operating an additional rural property can introduce liability exposures that need reviewing.

These may include:

• Public liability. Activities involving visitors, contractors, delivery drivers and other people entering the property.
• Livestock. Potential liability arising from animals escaping onto roads or neighbouring properties.
• Employees and contractors. Workers compensation obligations should be reviewed where people will work on the property. Whether contractors are treated as workers depends on the arrangement and applicable state or territory requirements.

The extent of any insurance response depends on the circumstances and the relevant policy wording.

If the additional property will form part of an existing farming operation, check whether your current liability arrangements extend to the location and proposed activities.

For further information, see our Liability Insurance page.

Check how the new property fits your existing farm insurance

Purchasing or leasing an additional block does not necessarily mean arranging a completely separate insurance policy.

Depending on the circumstances and insurer requirements, some assets and exposures may be considered within an existing farm insurance program.

However, additional locations, farming activities, buildings, machinery and livestock should be reviewed.

Do not assume an existing policy automatically extends to the new property.

Our Farm Insurance page explains the types of property and farming exposures that may be considered within a farm insurance arrangement.

Involve your broker before committing

An insurance review before signing can help identify matters that may affect the available cover, proposed terms or cost of insurance.

Useful information to have available includes:

• The property address and details of the land.
• Buildings, improvements and other assets included in the transaction.
• The proposed farming activities and intended use of the property.
• Any known damage, previous incidents or relevant inspection findings.
• A copy of the proposed contract or lease, particularly the insurance obligations and relevant dates.
• Existing insurance details if the property will be added to an established farming operation.

RMA Insurance Brokers can review the information, identify matters requiring insurer consideration and discuss the insurance arrangements available.

Any proposed cover remains subject to insurer acceptance, the policy wording and applicable terms and conditions.

If you’re considering buying or leasing rural property, contact RMA Insurance Brokers before committing so the insurance requirements can be reviewed.