Arranging building insurance before the exchange of contracts is essential if you’re buying a new home.
Having insurance in place will cover the cost of damage to your new home caused by unforeseen events such as fire, flooding, or burglary and many mortgage lenders may require it before they can provide you with the loan.
While your solicitor or conveyancer will handle most of the paperwork involved with moving house, you must arrange buildings insurance yourself. Here’s what you need to know.
EASY AS HACK
Use the Association of British Insurers’ free rebuild cost calculator when you arrange your buildings insurance.
At a glance
Here’s why you should get building insurance before exchange:
- To ensure you can pay to repair damage to structures like the walls, roof and floors of the home you’re buying
- It’s very often required by many mortgage providers.
When should I get home insurance when buying a house?
Home insurance consists of buildings insurance and/or contents insurance, to provide financial protection for your home and personal belongings.
Buildings insurance provides cover for the physical structure of your home, including walls, roof and floors and you should have in place for your new address from the date you exchange contracts, even though you might not be moving in on that day. Once you’ve exchanged contracts, you become legally responsible for the property1, including insuring it.
If your new home is going to be empty for more than a month, make sure you tell your insurer. When a property is unoccupied, the risk of things like break-ins or hidden problems (such as leaks) is higher. Because of this, insurers may add special conditions to your policy.
Many insurers also have a limit on how long a home can stay unoccupied (for example, 60 days). After this time, some parts of your cover may no longer apply even if the incident you’re claiming for happened during those first 60 days.
There are also certain steps you may need to take before your insurer will class the home as ‘occupied’. Simply visiting the property regularly, or overnight stays may not be enough. Some insurers only treat a home as occupied once it’s being lived in normally — for example, when someone has fully moved in and is using it as their main residence. Until then, the insurer may still view the property as unoccupied, which can affect the cover available under your policy.
Once you’ve moved in, it’s a good idea to have contents insurance to protect your belongings too. It might also be useful to cover your contents during transit as part of the moving process.
Find out more about the difference between buildings insurance and contents insurance.
Why should I get buildings insurance on exchange?
The exchange is the legally binding stage of buying a home, when the buyer and seller sign the contract2. At that point, the buyer becomes responsible for the property, and having insurance in place provides protection against damage to it.
Buildings insurance covers the cost of repairing or rebuilding the structure of your new home if it is affected by a range of risks, including:
- Fire
- Flood
- Storms
- Theft
- Burst water pipes
- Fallen trees
- Subsidence
The structure includes not only the walls, roof and floors but also the garage, sheds and other outbuildings, as well as permanent fixtures and fittings, such as your kitchen, bathroom, drains and pipes.
When you’re buying a home with a mortgage, many lenders will typically ask you to have buildings insurance ready before you exchange contracts3. It’s simply one of the conditions they set to help protect your new home.
If you didn’t have buildings insurance at exchange and there was a fire or flood at your new home, you wouldn’t be able to claim for repairs or rebuilding and would have to foot the bill out of your own pocket.
Find out more about Ageas buildings insurance.
Who is responsible for insurance between exchange and completion?
As the buyer, it is your responsibility to have building insurance once contracts are exchanged.
If you are buying a freehold property4 – one that you own with no fixed term – you should arrange building insurance that begins on the day the contracts are exchanged.
For most leasehold properties, with fixed-length ownership5, the freeholder (landlord) or their management agent is responsible for arranging building insurance, but you, as a leaseholder, pay for it as part of a service charge.
Can you exchange contracts without insurance?
The Standard Conditions of Sale – produced by the Law Society of England and Wales and used in most residential property sales – includes a condition that buyers must have a valid insurance policy in place from the moment of exchanging contracts.
It’s also the case that before you get to the exchange stage, lenders will almost always insist you have buildings insurance as a condition of a mortgage.
How do you arrange buildings insurance before exchange?
Home buyers usually arrange buildings insurance with an insurance provider and set the policy to start on the day contracts are exchanged.
Shopping around can be really helpful, as it allows you to compare options and make sure you’re choosing a product that suits your needs at a price that feels right for you. To do so, you’ll need the following information:
- Address of your new property
- The type of property you’re buying and construction details (e.g. brick, stone or concrete)
- Estimated rebuild costs (not market value)
- Expected exchange date
- Your mortgage lender’s details
See our guide to estimated rebuild costs.
Alternatives to arranging buildings insurance before exchange
The alternatives to arranging buildings insurance before the exchange of contracts are:
- Arrange buildings insurance on the day of exchange. However, as you can choose when the cover begins, it’s easier to sort this out in advance of the exchange to avoid any stress and last-minute issues.
- Leave it to your mortgage provider to arrange insurance – this is usually more expensive than arranging your own cover.
- Go without insurance – this could void your mortgage terms or block your attempts to get one, as lenders will usually insist you have buildings insurance. But this may be the only option when building insurance isn’t available/necessary such as due to disrepair or development.
Will my existing buildings insurance cover me for my new home?
You may be able to transfer buildings insurance from your current property to the new one without having to take out a new policy.
However, you’ll need to contact your insurer with details of the new property and arrange for cover to start from the date you exchange contracts.
This could come at extra cost as insurers will consider your new property’s location and age. Your insurance provider may also charge you to make a policy change. In this case, it's worth comparing the costs of switching insurers vs changing your policy.
How do I arrange buildings insurance for a new-build home?
You may think that new build homes don’t need buildings insurance as they are required by law to come with a warranty6. While the warranty covers you for structural defects, it won’t cover damage from events like fire, storms or burglary. Arranging cover for a new-build house is similar to arranging it for an older home.
FAQs
What happens if the house sale falls through and you’ve purchased buildings insurance?
If you’ve purchased buildings insurance and the house sale falls through, you should check the terms of the policy and contact your provider. If you cancel within the 14-day cooling-off period, you should get a full refund. If you cancel after that, you’ll usually still get some money back, but the insurer will deduct the cost of the days your policy has already covered you.
Do mortgage lenders require buildings insurance at exchange?
Most mortgage lenders will require buildings insurance to be in place from exchange of contracts to protect their interest in the property.
Who is responsible for property repairs after exchange?
If the damage to the property occurs after exchange, the seller must let you know and you are responsible for repairs.
What if you’re buying a leasehold flat?
With most leasehold properties, the freeholder will arrange buildings insurance.
Find out more about Ageas home insurance.
Sources
[1] https://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/how-do-i-exchange-contracts/
[2] https://www.gov.uk/buying-a-home/transferring-ownership
[3] https://www.citizensadvice.org.uk/consumer/insurance/types-of-insurance/buildings-insurance/
[4] https://www.moneyhelper.org.uk/en/homes/buying-a-home/leasehold-vs-freehold-whats-the-difference
[5] https://www.gov.uk/leasehold-property/service-charges-and-other-expenses
[6] https://www.legislation.gov.uk/ukpga/2022/30/part/5/crossheading/new-build-home-warranties
