If you have received approval for a home loan, you have already jumped a number of hurdles and congratulations are in order. Your next step is to provide your lending institution with information that confirms your property or asset is insured. This is where a Certificate of Currency comes in.
Who needs a Certificate of Currency?
A certificate of Currency is the documentation your insurance company gives you (or via your insurance broker) that confirms your home or commercial property has insurance coverage. You receive this once your policy has been confirmed and you have made payment for your policy.
What information does a Certificate of Currency contain?
Most Certificates of Currency contain standard information such as:
- Name of theInsured Party: the correct names of the insured party i.e. the owner(s) of the property.
- Insured Address: This can be the home address or the investment property address of the borrower.
- Policy number and expiry date: It refers to the insurance policy number and the date the contract expires.
- Protection period: this is the period of insurance. The time and date of the commencement and the expiration of the insurance should be mentioned clearly.
- Interested Party: Often the financial institution that is lending you the money for the purchase of the property is mentioned as the interested party.
- Limit to protection: The maximum amount, which the insurance covers, is indicated and any limits to protection.
- Premium Paid: This explains the exact premium amount and the method of payment. Some Certificates of Currency declare the monthly repayments and the method, while others might not mention it in the contract.
Why Must I Provide a Certificate of Currency?
There are a few reasons why you may need to provide your Certificate of Currency. These include:
- Your lender must have proof that the property and the lender have insurance protection should the property sustain damage. This protects your lender from having a damaged property with no compensation
- A bank or mortgage broker may request you confirm that the item they have lent money towards is insured so they can receive their payment in the event of a total loss. A lender will generally not advance a home loan without confirmation of coverage
- A contractor may request one confirming public liability cover from their subcontractor to ensure that if the subcontractor causes property damage or in the event of litigation against the contractor, they will be able to counterclaim against the subcontractor.
Some Reasons a Lender may not need a Certificate of Currency
- If you are purchasing vacant land, there is no house or other building to insure. Some banks ask for a certificate anyway.
- If you are building a home, a builder’s insurance policy should cover against losses until your home is complete. The bank will generally ask for the builder’s insurance before it releases the first payment to the builder.
- Units and town houses are generally strata titled. Because the strata corporation will insure the building for you, the lender may not require evidence of the insurance.
Do you need to provide it again when you renew your insurance?
The bank assumes you renew your insurance every year and may not ask for evidence of your renewal.
However, if you don’t renew your insurance, then it’s likely that you’re not meeting the terms of your loan agreement with the bank. If the bank becomes aware of this, then they may charge you a default interest or take legal action against you.
You will often need to produce a Certificate of Currency if you are:
- Purchasing a property. Depending on where it is, you may be required to insure the property from the day you exchange (sign contracts and pay the deposit), not just from the settlement as many people think
- Leasing a commercial building
- A business or organisation submitting tenders, funding/grant applications, etc.
- Taking on a job for a client (individual or business) – they make ask you for your Certificate of Currency to prove that you have the insurance to cover your work
- Purchasing a vehicle with finance
- Applying for or renewing professional licenses
When is a Certificate of Currency provided?
A Certificate of Currency is generally provided as soon as you agree to take out an Insurance Policy and when payment of the policy has been made. You will not be able to claim against the Policy unless the premium has been paid even if you were issued with the Certificate of Currency.
How can we help?
If you’d like to discuss your Home & Contents Insurance or your Commercial Property Insurance with a Qualified Practicing Insurance Broker, give us a call.