Do I need home insurance before exchange?

It’s essential to get insurance sorted at the right time during the house-buying process.

And the question a lot of people ask is do you need home insurance before exchange? Here’s what you need to know when you’re buying cover for a new home. 

EASY AS HACK

You can choose the date you want your home insurance to start, so give yourself time to compare prices in advance once you know your exchange date.

That way, you’re not rushing into anything and can make sure you have the right level of cover at the right price.

Home insurance when buying a house

If you’re in the process of buying a home, having buildings insurance in place will be a condition of your mortgage. It can cover you if your new home is damaged or destroyed by an event such as a fire, flood, storm or vandalism.

While your solicitor or conveyancer will handle most of the paperwork associated with moving house, you must arrange buildings insurance yourself.

When should I get home insurance when buying a house?

You should have buildings insurance 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 property, and that includes taking responsibility for insuring it.

If your new home is going to be empty for more than a month, tell your insurer. Unoccupied properties increase the risk of a break-in or undetected problems such as leaks, so your provider needs to know.

You don’t need contents insurance to buy a house, but once you’ve moved in, it’s a good idea to have it to protect your belongings. It might also be useful to cover your contents while they’re in transit as part of the moving process.

Why do I need buildings insurance on exchange?

Aside from it may be a condition of your mortgage, buildings insurance is essential for other reasons too. You become responsible for the property, once you've exchanged contracts, and having insurance in place offers protection against damage to your home.

It covers the cost of repairing or rebuilding the structure of your property if certain things happen to it. The structure includes the walls, floors, roof, garage, shed and other outbuildings, as well as permanent fixtures and fittings such as your kitchen, bathroom, drains and pipes.

Imagine you didn’t have buildings insurance at the point you exchange contracts and there was a fire or flood at your new home. You wouldn’t be able to claim for repairs or the cost of rebuilding your new property. 

Will my existing policy cover me for my new home?

You may be able to transfer home insurance from your current property to the new one without having to take out a new policy. 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. You’ll also need to make sure your existing property will still be covered, either by your own policy or the buyer’s.

The cost of the cover could change once the policy is transferred as insurers take several factors into account, including the local area and age of the property.

Depending on your insurance provider there may be a fee to make a change or to cancel your policy. In this case, it's worth comparing the costs of moving to a different insurer vs changing your policy.

How do I arrange home insurance for a new-build?

A new-build home should, by law, come with a warranty, but you’ll still need to get buildings insurance on top of this. While the warranty can cover you for any defects or structural damage to the home, it won’t provide protection in unexpected emergencies like a fire, storm or burglary.

Arranging cover for a new-build house shouldn’t be any different from an older home. The only barrier you might come up against is if the home hasn’t yet been registered on the Royal Mail database, as it won’t show up if you’re trying to compare quotes online. In this case, it's best to speak to an insurance broker or phone insurer directly.

What else should I consider when buying insurance for a new home?

When you’re comparing quotes for home insurance, there are a few other important things to think about. These include:

Your new home’s rebuild value

Your buildings insurance needs to cover the cost of fully rebuilding your home, including any outbuildings, if it ever got destroyed. This can be lower than its market value as it doesn’t include the land around the building. However, for some properties, rebuild costs may be higher than market value, particularly if the property features non-standard materials or has any specialist architectural features that need recreating.

Use the BCIS’s rebuilding cost calculator if you need help working out the cost of rebuilding your home. But remember, this is only ever a guide, and you need to take into account any special features your property may have, such as outbuildings or listed status.

Building work you’re having done

If you’re renovating the property before moving in, you’ll need to tell your insurer about the planned work. Major home improvements can be an increased risk because of walls being open up or roofs being removed, for example. They can also increase the risk of burglary because doors and windows might not always be secure. If you’re undertaking major works, it is likely that a ‘standard’ insurer may find the level of risk unacceptable and you have to turn to a specialist provider until your renovations are complete.

You don’t have to use your lender’s recommendation

Your mortgage provider might offer home insurance or recommend an insurer, but it’s best to do some independent research and make your own choice.

How much excess you’ll agree to

You can lower your premium by paying a higher voluntary excess. This is an amount you’ll pay towards any claim you make. Check the excess amount before you buy cover, to make sure you can afford to pay excess in the event of a claim. Also check whether one excess or two apply for a claim where both buildings and contents are damaged.

The cheapest quotes aren’t necessarily the best

Price comparison sites list the cheapest deals first, but these are often the most basic policies that might not include all the features you need. Remember to compare the level of cover as well as cost when getting a quote.