Exchange to completion insurance

As soon as you become legally responsible for a property, you’ll need to have buildings insurance in place.

Buildings insurance can offer priceless peace of mind when it comes to insuring your home exchange and completion. Find out why and when you need this type of home insurance cover.

What is buildings insurance?

Buildings insurance will cover the cost of rebuilding or repairing your home in the event of damage to your property.

Not all buildings insurance is the same so you will need to shop around and compare different policies before you buy.

What does buildings insurance cover?

Buildings insurance will cover up to the full cost of rebuilding your house should it be damaged or destroyed. This is likely to include demolition, site clearance, and even architects' fees.

Garages, sheds and fences are also covered, as well as the cost of replacing items such as pipes, cables and drains.

Buildings insurance covers loss or damage caused by:

  • fire, explosion, storms, floods, earthquakes

  • theft, attempted theft and vandalism

  • frozen and burst pipes

  • fallen trees, lampposts, aerials or satellite dishes

  • subsidence

  • vehicle or aircraft collisions

  • car and lorry collisions

When do I need buildings insurance?

When you are buying a property it becomes your responsibility the moment you exchange contracts.

If you have had to buy your home with a mortgage, your mortgage lender will insist you take out buildings insurance as soon as you exchange contracts

Your home is likely to be the most expensive purchase you’ll ever make, so insuring it is essential.

It’s not a legal requirement to have buildings insurance, but your mortgage provider will usually insist that you do have cover in place

  • Until your mortgage is repaid, your mortgage lender will have a financial interest in the property and will therefore want to make sure their asset is protected

  • Unless you have other means of paying for the cost of rebuilding or repairing or your home, you would need to have buildings insurance in place in the event of damage to your home

Do I have to buy my lender’s buildings insurance?

You do not have to buy your mortgage lender’s buildings insurance, although your lender can reject your choice of buildings insurance if they feel the policy doesn’t offer the right level of cover.

The best way to protect yourself is to make sure you shop around for buildings insurance and compare different providers online.

Do I need buildings insurance before I exchange?

You do not need to take out buildings insurance before you exchange contracts as you are not yet legally responsible for the property.

You only become legally responsible once you exchange contracts with the seller of the property you are buying.

If you have any questions as to when you will be exchanging contracts speak to your solicitor or conveyancer.

How will I know when I exchange?

Your conveyancer, or solicitor will contact you and tell you when you need to arrange buildings insurance.  

Do I need buildings insurance between exchange and completion?

Yes, you will need to have buildings insurance in place, as even though you have not completed the sale of the property it is now your responsibility.

The standard residential conveyancing contract issued by the Law Society passes the obligation to insure the property from the date of exchange of contracts to the buyer of the property.

Does the seller need to have buildings insurance?

You cannot rely on the seller having buildings insurance, they are under no obligation to insure after exchange.

So, if the house is destroyed by fire or a storm between exchanging contracts and the date you move, you will still be committed to buying it. 

Do I need buildings insurance if I’m a leaseholder? 

This will largely depend on the terms of your lease, as quite often freeholders – who own the land the property is built on – will buy buildings insurance and then split the cost between leaseholders.

Because flats are owned by both leaseholders and freeholders, getting the right cover is essential. 

Leaseholders and freeholders both need to look after the property and a lease will state who needs to be responsible for insuring what.

A freeholder will need to make sure they insure, and maintain:  

  • The building’s structure, including the roof and guttering

  • Shared parts of the building, such as lifts and stairways

Leaseholders will need to maintain, and insure:

  • Internal plumbing, wiring, plasterwork and floorboards, paintwork and decoration

  • Carpets, furniture and appliances

Can I cancel my old buildings insurance when I exchange contracts?

No, you must never cancel any insurance until you have completed on the sale of the property you are buying.

If you are selling a property to buy a new one and the person buying your property pulls out after you exchange, and at the same time something happens to the property you are buying you would not be covered – and may have nowhere to live.

Of course, this is a worst case scenario and although it is unlikely it can happen.

If you have both buildings and contents insurance on your old property then you are best to keep both until you move, your insurance company can adjust your payments so that you are not overpaying for cover.

Can I get temporary insurance between exchange and completion?

Many insurance companies won't provide buildings insurance for the period from exchange to completion. The house is not yet legally yours and it is still being lived in by somebody else. 

There are some specialist companies that offer this type of insurance but you need to compare quotes online to make sure you get the right cover for you. 

Insurance of this type may end up costing more than a longer-term policy.

How can I buy buildings insurance for a home I’ve not yet moved into? 

When you are in the process of getting a quote for buildings insurance for a new property there may be details that you don’t know. For example, how old the property is, or what type of construction it is.

  • Always go back to the seller or the estate agent to check property details

  • Never give information which is inaccurate

  • It is better to say you don’t know than to give the insurer the wrong information

Who is covered if something happens between exchange and completion? 

If damage occurs to the property it will be your responsibility to repair it. Which is why you need to make sure you have buildings insurance in place.

Does buildings insurance include fixtures and fittings?

The seller must also leave all fixtures and fittings as agreed. This can include curtains or carpets. If you find something’s been removed that shouldn’t have been, then you need to contact your solicitor. 

How much does buildings insurance cost?

According to the Association of British Insurers (ABI) the average annual cost of buildings insurance was £263 in 2019, this is compared to £258 in 2018.

Is buildings insurance the same as home insurance

Home insurance is a general term used to describe two very different types of insurance, buildings insurance and contents insurance.

Buildings insurance covers the infrastructure of your home:

  • The cost of rebuilding or repairing a home

  • Permanent fixtures and fittings, like kitchens and bathrooms

Contents insurance covers the things you keep in your home:

  • Furniture

  • Personal belongings 

  • Computing equipment and TVs

  • Some types of flooring including carpets

Home contents insurance is often sold alongside buildings insurance as a combined policy. 

Sometimes these policies work out cheaper when bought together but price is not always an indication of suitability so always compare contents policies before committing to one.

27 October 2020