Do I Need Home Insurance Before Exchange
Do I Need Home Insurance Before Exchange
“I tried a new workout today—let’s just say my muscles are telling me they’re definitely not impressed. But hey, at least my gym membership is still covered, right? Which got me wondering about how many people actually think about insurance before they jump into something new. Let’s take a look!”
Purchasing a home is far from simple – there are a lot of things on top of your mind and many more you must have organized while the sale is moving forward. Whether you are aiming to become a landlord with several properties, or this is your first time owning a buy-to-let property, you need to be aware of sellers’ obligations. Your solicitor or conveyancer will handle the legal paperwork and contracts, but the building insurance must be on your ‘to-do’ list. Most buy-to-let mortgage providers require a landlord’s building insurance. Yet, there are many questions buyers are not sure about when home insurance must be in place during a sale. A frequent question asked is ‘’do I need building insurance before exchange?’’
When Should I Get Home Insurance When Buying A House?
Even if you may not be moving in that day, you should have buildings insurance for your new address in place from when you exchange contracts.
Once you’ve exchanged contracts, you are legally responsible for the property, which means you must take out insurance on it.
If your new home will sit empty for more than a few weeks after you move, you should notify your insurer. Vacant properties are at greater risk of a break-in or of problems like leaks going unnoticed, so your provider needs to know.
You don’t need maintenance insurance to purchase a home, but once you do move into one, you should have it to protect your belongings. As you pack, it can also be helpful to cover your goods in transit as part of the moving process.
Why Do I Need Buildings Insurance On Exchange?
But even if it may not necessarily be a stipulation of your mortgage, buildings insurance is essential for other factors too. Once you’ve exchanged contracts, you’re responsible for the property, and insurance protects you for damage to the home.
It provides payment for fixing or reconstructing the structure of your property if specific events occur. The structure constitutes the walls, floors, roof, garage, shed and other outbuildings, plus permanent fixtures and fittings like your kitchen, bathroom, drains and pipes.
What if you did not have buildings insurance when you exchanged contracts and a fire, or flood, erupted at your new address? You would not be able to make a claim for repairs or the cost of reconstruction within your new property.
Will My Existing Policy Cover Me For My New Home?
Direct insurers, for instance, would allow this if you transfer home insurance from an existing property to the new one. You’ll have to contact your insurer with the details of the new property and arrange for cover to start from the date you exchange contracts. You’ll also want to confirm that the property you currently own will still be covered, either by your own policy or the buyer’s one.
Once the policy is transferred, the cost of the cover could alter as insurers consider various factors, including local area and age of the property.
The policy change or cancellation process may be subject to a fee, depending on your insurance provider. It’s a good idea to weigh the cost of switching to a different insurer vs. switching your policy.
How Do I Arrange Home Insurance For A New-Build?
New-build homes must, by law, come with a warranty, but you’ll still need to take out buildings insurance in addition to this. Although the warranty can protect you for any defects or structural damage to the home, it won’t cover you in unforeseen emergencies like a fire, storm or a burglary.
This should be no different when arranging cover for a new-build house than an older property. The only stumbling block could be if the home hasn’t yet been added to the Royal Mail database, in which case it won’t appear if you’re trying to compare quotes online. In that situation, it’s better to consult an insurance broker, or call insurer directly.
What Else Should I Consider When Buying Insurance For A New Home?
There are a few other key things to consider when you’re comparing home insurance quotes. These include:
If your home (and any outbuildings) was to be destroyed, your buildings insurance needs to cover the full rebuilding cost. Because it does not include the land around the building, this can be less than its market value. However, for some properties, the cost to rebuild may exceed the market value of the home, especially for properties that include non-standard materials or that have any specialist architectural elements to recreate.
If you’re unsure how to work out the cost to rebuild the home you have lost, use the BCIS’s rebuilding cost calculator. But bear in mind that this is always just a guide and you'll need to consider any particular characteristics of your property, including listed buildings or listed status.
If you’re doing renovations on the property before you move in, you will need to inform your insurer of the work you’re planning. Major home improvements can pose a heightened risk, since walls might be opened up or roofs removed, for instance. They can also heighten the risk of burglary, since doors and windows are not the most secure at all times. If you’re carrying out major works, then it’s possible a ‘standard’ insurer may deem the level of risk unacceptable and you will have to use a specialist provider until your renovations are complete.
Your mortgage lender may offer home insurance or recommend an insurer, but you should do some independent research and make your own decision.
A higher voluntary excess will reduce your premium. This is a sum you’ll pay for any claim made. Ensure you can pay excess on a claim before you buy cover and check the excess amount.
Conclusion
Insurance is one thing you can do as your move gets closer. Plan at least three months, and don’t overlook the resources at your disposal, such as our Moving House Checklist here.
And when you’re all set to protect your new pads, it’s easy to get cheap cover by comparing home insurance quotes with MoneySuperMarket. Get the balance right by comparing deals by cost, coverage and claims excess required, so you don’t end up over-insured or under-insured.
When you make the move into your new home, know that with proper insurance in place, you can do so with the confidence that your home and stuff are covered every step of the way.
FAQ
Who finances the property is typically laid out in your contract with the seller (or with the buyer if you are selling the property).
Typically, the buyer is responsible for keeping the property insured after the exchange, even if you have not yet moved in. However, there are exceptions. For instance, the seller could have a separate contract or a leasehold contract which mandates insurance (such as a leasehold agreement).
Whether you can move your policy will depend on your provider. Some will permit you to transfer your coverage to your new residence, however that doesn’t imply your insurance coverage will price the identical. Your insurer will probably redo the pricing for your insurance to reflect what your new home is worth and the risks associated with that home.
So, before you decide to transfer your old policy, it might be worth checking the market to find a better deal on a new home insurance policy elsewhere.
If you are leaving a property that you intend to rent to someone else, you will need to apply for a new insurance policy. Your regular home insurance won’t protect you in situations like this. But what you actually need is landlord insurance. Landlord insurance will still cover the building and contents you own, but it can also cover lost rent, liability claims and emergency call-outs.
