Your mortgage lender will tell you that you need to arrange buildings insurance before they’ll confirm your home loan. But what is it, what does it cover, and where can you get it?
This quick guide will tell you everything you need to know about getting buildings insurance for your new home.
What is buildings insurance?
Buildings insurance is one form of home insurance. You can also get a type of home insurance which is called content insurance, but this only covers the belongings inside your home.
Buildings insurance provides cover for the structure and physical property of your home. For example, if a fire breaks out and damages part of your home, your insurance will pay the cost of repairs.
A good policy will cover you against most eventualities, including:
- Adverse weather, flooding, storm damage
- Fire damage
- Damage from fallen trees, lampposts, or cables
- Vehicle collisions
- Attempted or actual damage from theft, arson, or criminal act
Read the fine print of any policy to check that the total cover would pay for the costs of rebuilding your home from scratch. Any policy that doesn’t do this is not comprehensive and could leave you with huge costs.
Policies won’t cover damage caused due to neglect of general wear-and-tear repairs. For example, if your roof leaks because you’ve not repaired or replaced broken guttering, your insurer may not pay your claim.
Do I have to have it?
Buildings insurance isn’t a legal requirement for homeowners. If you’re a cash buyer – without a mortgage – you won’t be required to buy it before you complete the purchase.
However, mortgage lenders require buildings cover before you complete on the purchase of your home. This is because they need to protect their interest (i.e., your repayments) should something happen to your property. The insurance needs to cover the cost of a total rebuild of your property, including demolition and architectural fees.
If you don’t have buildings insurance and you faced a rebuild or major repairs, the costs could bankrupt you – and the mortgage provider would lose out.
What if I'm buying a leasehold property?
Most leasehold properties have buildings insurance covered in the annual maintenance fees. For example, if you live in a flat and pay a maintenance fee, this could cover repairs to communal areas and the building structure.
Check the leasehold paperwork to find out what is already covered by your agreement on the lease, and what you may need to insure separately.
When do I need to arrange it for my new home?
A common misconception is that you only need insurance from the day your house purchase is completed. You actually need your insurance in place from the date you exchange contracts, which is usually a few weeks before you complete the purchase. This is because the property is your legal responsibility once you exchange contracts. The vendor may still be living in the property, and they should still have their buildings insurance too. However, if any problems should arise in the time between exchange and completion, you could be liable for repairs or claims.
How do I find a good buildings insurance deal?
Your mortgage lender may offer buildings insurance as part of your arrangement with them. However, it’s advisable to shop around first.
Your lender can recommend preferred insurers, or their own product, but they can’t force you to take their buildings insurance product. A lender can, in theory, reject your buildings insurance if they feel the policy won’t fully cover the cost of repair or rebuilding expenses.
Remember, too, that buildings insurance policies renew every year. Make sure your insurance doesn’t auto-renew as this often hikes the price up, even when you’ve not made any claims. Make a note a few weeks before your insurance runs out each year, to shop around for a new deal. You can often go back to your existing provider to negotiate a match for a lower quote you’ve found elsewhere.
Your mortgage adviser can help you find buildings insurance deals
A great way to find buildings insurance, however, is to speak to your mortgage and protection adviser. They can help you find the right product, and advise of any additional covers you may need, such as extra flood insurance if your property is in a high-risk area. Your adviser will have access to a range of insurance deals that you might not be able to find yourself.
Contact your mortgage and protection advisers in Hull to discuss your buildings insurance options today.
Find out more about our Mortgage and Protection Advice service in Hull