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Buildings Insurance: What You Need To Know
When you buy a house, most lenders will insist that you have buildings insurance as a condition of the mortgage.
Buildings insurance protects the structure of your home as well as permanent fixtures and fittings, such as fitted kitchens, baths, sinks and toilets. It usually extends to outbuildings, such as garages, greenhouses and garden sheds too. If you want other features covered, such as fences, gates, parking areas and swimming pools, you will need to check with the insurer. The policy may also provide you with alternative accommodation if your home is uninhabitable.
Most buildings insurance policies will cover a wide range of possible events that could damage your home, such as fire, subsidence, storms, flooding, theft or attempted theft, escape of water from tanks or pipes, falling trees or branches, damage by vehicles or animals, and escape of oil from heating systems. The policy should clearly tell you what is and what is not covered.
Your property will be insured for its rebuild value – that is the cost of re-building your home in the unlikely event that it is destroyed. This is called the ‘sum insured’. The insurance does not cover the market value or the council tax valuation band of your property. The rebuild value of your property should appear on your mortgage agreement or the deeds to your home. However, as a homeowner, it is your responsibility to tell your insurer what the correct rebuilding cost is. To work out the sum insured, the Association of British Insurers has a useful calculator on their website.
However, it is worth remembering that, with one or two exceptions, you are not obliged to buy buildings insurance from your mortgage lender. Research carried out in October 2007 by Sainsbury’s calculated that 2.94 million people believed that they had to buy their buildings insurance from their mortgage lender in order to secure their mortgage. As the NatWest says ‘Providers of mortgages normally require home buildings insurance to be arranged as a condition of the mortgage, but you don't have to buy your home buildings insurance from the same company who provided your mortgage’.
When you have assessed your home insurance requirements, it is wise to get several quotes from different companies and compare the cover and costs.
You may be able to get a discount by buying online, purchasing your buildings and contents policies together, or as a new customer. Remember to tell the insurance provider the number of years of no claims and any crime prevention measures you have, such as being located within a neighborhood watch area or having a burglar alarm or other security features.
When you have your quotes, take your time looking over the various offers and see what is and is not included before deciding. You might also want to ask a friend for a recommendation or look on-line at a reputable money advice site, such as Guardian Money or one of the many comparison sites. Many companies provide specialist cover for specific markets – RIAS, for example, who provide home insurance services for the over-50’s.
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