What is a certificate of currency?

A certificate of currency is a document certifying that you have insurance, and that it is current. You get it from your insurance provider.

Why do you need insurance before you’ve exchanged?

Why do you need home and contents insurance now and not when you move in? Because as soon as the contract of sale becomes binding, you are the beneficial owner of the house. In law, the seller’s job is to take care of it for you until settlement.

What that means is that if the house gets damaged, the seller isn’t responsible for fixing it unless they’ve caused the damage themselves. If a tree comes through the window between now and settlement, it’s your problem to fix.

Why does the bank care? That house is the security for your loan. If something happens to it and it goes down in value, and then you don’t pay your loan, the bank is also at risk. If it’s a small amount of damage, it might not be a big deal. But sometimes it’s pretty major.

A cautionary tale…

True story: I sold a house to a lovely young family once. It was their first home, they were very excited. They figured they’d wait until they moved in to take out home and contents insurance, because the house was vacant anyway and sealed up tight. One week before settlement, the next door neighbour got blind drunk and then drove home. He drove straight through their front fence, straight through the garden and straight into their lounge. The front wall was destroyed. The carpet was ruined.

They rang me up in tears asking what they could do. The answer was pretty much nothing. Of course the idiot neighbour’s insurance wasn’t going to pick up the tab for damage done through criminally negligent driving. And it wasn’t the seller’s fault, so they weren’t going to cover it either.

The repairs ran to around $100,000, and that’s before the cost of the short-term rental they had to find, two sets of moving costs and a lot of heartbreak.

How do you get a certificate of currency?

The first thing you need to do is choose an insurance provider. And because I know you, and I know you’re stressing about what insurance to get and how much for (let’s face it, you probably have a spreadsheet for that), just remember that you can increase and decrease your insurance policy at any time. They also have cooling off periods. Do some estimates about how much your stuff is worth to calculate contents insurance. The insurance provide will guide you on the building insurance. Get a couple of quotes.

Then you need to decide if you’re going to get home & contents or just home insurance. Some people prefer to only get home insurance and then add contents on after settlement when the contents actually belongs to them (especially if it’s a long settlement), other people prefer just to pay contents insurance from the get go to save hassle of adjusting things later.

Then get on the phone to your insurance company and tell them you’ve bought a house. Quick tip, a lot of insurance companies have call centres open until late most evenings so you can move on this tonight. They’ll be able to provide you with a certificate of currency very quickly. Then it’s just a matter of sending it to the bank and you’re done!

 Either way, jump on it now so that you can get your exchange happening.