When to get building insurance when buying a house

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Buying a house involves a lot of decisions, and building insurance is one you should not overlook. Quotezone can help you compare policies from multiple providers quickly.

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Is building insurance needed before completion?

The current owner of the house you’re buying is responsible for insuring the property up until the sale is completed.  As a buyer, you need to put building insurance in place for the date you intend to exchange contracts.

Please note, your mortgage lender will probably insist that you have building insurance when buying a house to finalise the sale.

When should I apply for building insurance when buying a house?

With many insurers allowing you to apply online, it can be a pretty quick process to secure building insurance.  However, due to the importance of getting this insurance in place for the date of the exchange of contracts, you may like to plan well ahead of time and organise a start date for your policy which coincides with the exchange of contracts.  

An insurer will be more than happy to set a start date in the future if you’re trying to get all this in place weeks ahead of time.

What is homebuyers insurance?

Home buyer insurance, also known as home buyer protection insurance offers protection against legal and survey costs, and mortgage payments should a sale fall through.

Homebuyer insurance will not cover the property you are intending to buy, rather it protects you from the losses associated with a failed sale.  Though you do not have to have house buyer insurance to complete your sale, your mortgage lender will probably specify that you do need building insurance to complete the sale.

What do I need to take out building insurance when I’m buying a house?

Don’t worry about the fact that you don’t legally own the house you’re buying when you’re trying to organise building insurance.  You’ll simply need to give the insurer:

• The address of the property you’re hoping to buy.
• The materials used to build the property.
• The date the property was built.
• Safety features (such as smoke and security alarms).

Do I have to get building insurance from my mortgage provider?

No, you don’t have to.  You may have been told that you do and this is because historically you did need to obtain the building insurance from your mortgage lender.  The Office of Fair Trading decided that this wasn’t fair to consumers and so the rules changed.

Some mortgage lenders may still offer you this cover as part of a package deal but don’t assume that this will be the best option for you. Using a comparison tool may find you a cheaper building insurance quote.

Is taking out home insurance when you’re buying a house the same as taking out building insurance?

Home insurance can take several forms.  It can be building insurance, contents insurance or a combination of the two.  The combination of the two is popular once you’re living in your home but during the buying process, building insurance is all you’ll need.

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What happens to building insurance at exchange vs completion?

The key date for building insurance is exchange of contracts, not completion. At exchange, you become legally committed to buying the property. If the building is damaged between exchange and completion, you are still obliged to go ahead with the purchase at the agreed price.

The seller’s building insurance typically remains in force until completion, but their policy covers the seller’s interest, not yours. Your mortgage lender will almost certainly require you to have your own building insurance in place from the date of exchange.

If exchange and completion happen on the same day (which is common), arrange your policy to start on that date. If there is a gap between exchange and completion, your cover should start at exchange to protect you during that period.

How much building insurance do I need?

The sum insured on your building insurance should be the rebuild cost of the property, not the market value or the purchase price. The rebuild cost is what it would cost to rebuild the property from scratch if it were completely destroyed, including materials, labour, demolition and professional fees.

For most UK homes, the rebuild cost is lower than the market value because it does not include the land value. The Royal Institution of Chartered Surveyors (RICS) provides a rebuild cost calculator that gives an estimate based on the property type, size and region. Typical rebuild costs in the UK range from around £100,000 for a small terraced house to £400,000 or more for a larger detached property.

Your mortgage lender will specify a minimum level of building insurance, and underinsuring can mean a reduced payout if you ever need to claim.

What if the house purchase falls through?

If you arrange building insurance before exchange and the purchase falls through, you can usually cancel the policy without charge. Most insurers offer a 14-day cooling-off period after the policy start date, and many also allow free cancellation if the cover has not yet started.

If the policy is already active and you cancel outside the cooling-off period, the insurer may charge a small administration fee and refund the remaining premium on a pro-rata basis. Check the cancellation terms before committing.

Homebuyer protection insurance is a separate product that covers the legal and survey costs you lose if a purchase falls through. It does not replace building insurance.

You might also need

If you are buying a house, these related products may also be relevant:

• Buildings insurance – standalone cover for the structure of your home, including walls, roof, floors and permanent fixtures
• Contents insurance – covers your personal belongings inside the property once you move in

Comparing building insurance quotes on Quotezone takes minutes and searches policies from up to 40 UK providers. Compare home insurance quotes today.

This article is intended as generic information only and is not intended to apply to anybody’s specific circumstances, demands or needs. The views expressed are not intended to provide any financial service or to give any recommendation or advice. Products and services are only mentioned for illustrative rather than promotional purposes.

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