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Insurance When Buying a House: the Types You Need

Phi Spencer

By Phil Spencer

There’s so much to consider when buying a home, it’s easy for things to slip through the cracks.

Don’t let insurance be something you forget!

Particularly if you've only ever rented, it can feel as though you're in unfamiliar territory.

Time to break down the different types. Here's a closer look at insurance when buying a house.

Why do you need it?

Insurance is what will help you to your feet again if disaster strikes. If you’ve recently invested in property, you’re going to want to mitigate against anything potentially going wrong.

There are numerous different types of insurance. The main two are buildings and contents. You can purchase these separately or together.

Let’s look at the different types of insurance in depth…

What is buildings insurance?

Buildings insurance covers you for any structural damage to your home caused by an insured peril. This usually includes fire, flood, subsidence, storm and more.

It’s there to cover repairs which may need to be carried out in order to make your home habitable again. It often also covers permanent fixtures and fittings, such as baths and fitted kitchens.

If this is your first time buying a house, you might be unfamiliar with this type of insurance.

Do you need to insure your house?

Often, your lender will stipulate that you need buildings insurance for a mortgage. This means you may not receive a loan without it.

For landlords, it’s your responsibility to get buildings insurance, not your tenants. It’s not compulsory - but it is an expensive risk to take.

If you own your property as a leaseholder, speak with your solicitor to find out who pays the buildings insurance. In most cases, this is the freeholder.

When to get buildings insurance when buying a house

Ideally, get buildings insurance before you move in!

If you can, take it out as soon as you exchange contracts. This will not only help you be successful with mortgage brokers, but will confirm the sale.

Buildings insurance between exchange and completion

Don’t assume you’re liable for buildings insurance the day you move in. You could be responsible from the moment you exchange contracts.

This isn’t always the case, but it’s vital you check. The exchange of contracts process can be tricky! But, arming yourself with as much information as possible can help it run smoother.

What it cover?

In short: buildings insurance covers the cost of repairing structural damage to a property. This can include a range of things, such as:

However, as with anything, always read the small print. There are some circumstances when buildings insurance won’t cover you, e.g. leaking gutters or pest infestation.

Other exclusions include:

  • General wear and tear
  • Deliberate damage
  • If you haven’t been there for an extended period
  • Frost damage to external pipes

Of course, every policy is different. So, make sure you know exactly when you will and won’t be covered. Don’t wait until the worst happens to find out!

How much is it?

When it comes to buildings insurance costs, there’s no universal rule for how much you’ll be paying. This depends entirely on the property, the area it’s in and other individual circumstances.

What is contents insurance?

Contents insurance is for all the possessions you fill your home with e.g. TV, jewellery, photo albums, etc. This is generally used to guard against the devastation of losing your property in a burglary, fire or flood.

Again, it’s important to always read the small print. You may have to pay extra for accidental damage cover or personal possessions cover (items over a specified value).

Sometimes, you’ll be covered for items kept away from your property, such as laptops. However, this is not the case with every policy. Make sure you understand what you’re paying for!

For rental properties, landlords should insure any contents or furnishings they let the property with. Ensure your insurance provider covers accidental damage by the tenant. The tenant is usually responsible for insuring their own possessions while in the property. This should always be made clear by the agent.

Unsurprisingly, the average buildings insurance cost is typically higher than that for contents. But, these can be purchased together in a bundle. Buying both buildings and contents insurance together can help you save money.

Transferring existing policies

You may be able to transfer your existing home insurance policies from one property to another. Your insurance provider will be able to clarify whether this is possible. There may be a small fee charged, so be sure to discuss this with them.

You can cancel should the sale fall through.

Remember to make sure that your old home is still covered while you’re legally responsible for it.

Home buying process - always shop around 

Never go with the first insurance deal you come across!

In some cases, this might be the one you eventually choose. But, shopping around for insurance is one of the most important home buying tips around.

Also - remember - you don’t have to take every deal offered to you. Some mortgage lenders will try and persuade you to take out a particular cover - but the choice is down to you.

Whichever you choose, ensure your broker is authorised and regulated. For example, they should be regulated by the financial conduct authority.

It’s easy to get swept up by certain deals, but ensure you’re buying the best policy for your situation.

What is Home Buyers' Protection Insurance?

1 in 3 property purchases fall through. Homes Buyers' Protection Insurance covers expensive abortive costs for surveys and legal work should this happen to you.

If you are gazumped or left disappointed by the seller, you’ll still have to pay for services. Surveyors, solicitors and mortgage companies won’t work for free just because your sale hasn’t gone through. This often means you’re left out of pocket by hundreds, if not thousands, of pounds…

So, home buyers insurance, or gazumping insurance, will protect you should this happen.

Insurance cover for possessions in transit or storage

When moving house, it’s easy to forget that your belongings may not be covered in the removals process.

Check your current home insurance policy to ensure your possessions will be covered in transit. A study found 81% of insurance providers will cover you – on the condition you use a professional moving service. A DIY move isn’t usually covered.

Storage providers typically require you to use their insurance policy to cover goods stored with them. Some will accept evidence your current contents insurance covers them.

Mortgage payment protection insurance

MPPI is in place to cover your mortgage payments should you find yourself unable to pay them. This could be in the case of sickness or unemployment.

This protection is also referred to as mortgage life insurance. It can also be used to cover your family members should you pass away before your mortgage is paid off.

Do you need life insurance for a mortgage?

Despite what many people think, you don’t need life insurance to get a mortgage. This shouldn’t be a requirement of your lender!

In most cases, you’ll only be required to take out home and buildings insurance!

But, many people choose to take out extra to ensure their loved ones are looked after, as mentioned previously. This should prevent family members being evicted should the worst happen.

Before you buy

Before you buy your property, it’s important to know you’re moving to an area you’ll love.

Phil Spencer's property report allows you to look up details and find out useful information concerning the local area. Remember, where you live is just as important as the house itself! Get your property report here.

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