Buildings Insurance for Home Buyers
A practical guide to buildings insurance in the UK, including what it covers, when you need it, how to choose a policy, and what to watch out for.
What Is Buildings Insurance?
Buildings insurance covers the cost of repairing or rebuilding your home if it is damaged by events such as fire, flood, storm, subsidence, falling trees, burst pipes, or impact from vehicles. It covers the structure of the building itself, including the walls, roof, floors, ceilings, windows, doors, fitted kitchens, fitted bathrooms, and permanent fixtures. It does not cover your personal belongings or furniture — that is covered by contents insurance, which is separate.
Buildings insurance is not a legal requirement for homeowners, but it is almost always a condition of your mortgage. Your lender requires it because the property is their security for the loan, and they need to know it can be rebuilt if something catastrophic happens. Even if you buy without a mortgage, buildings insurance is strongly recommended to protect your investment.
When Do You Need Buildings Insurance?
You need buildings insurance in place from the date of exchange of contracts, not completion. This is because from exchange onwards, you are legally committed to buying the property and bear the risk of any damage to it. If the property burned down between exchange and completion, you would still be legally obliged to complete the purchase at the agreed price, and the seller's insurance would not cover you.
In practice, most buyers arrange their buildings insurance to start on the expected exchange date and notify the insurer of the actual exchange date once it happens. If exchange is delayed, most insurers will adjust the start date without charge.
What Does Buildings Insurance Cover?
A standard buildings insurance policy covers damage caused by a range of insured events, commonly referred to as "perils." These typically include:
Fire, smoke, and explosion: Damage caused by fire, whether accidental or caused by third parties, as well as smoke damage and explosions.
Storm and flood: Damage from severe weather including high winds, heavy rain, lightning, and flooding from rivers or surface water. Note that general wear and tear from weather exposure is not covered.
Escape of water: Damage caused by burst pipes, leaking tanks, or overflowing cisterns. This is one of the most common claims on buildings insurance. The cost of tracing and repairing the leak itself may or may not be covered depending on your policy.
Subsidence, heave, and landslip: Movement of the ground beneath the property that causes structural damage. Subsidence claims can be complex and may affect your ability to get affordable insurance in the future.
Theft and vandalism: Damage to the building caused by break-ins or deliberate damage by third parties.
Impact: Damage caused by vehicles, aircraft, or fallen trees colliding with the property.
Most policies also include cover for alternative accommodation if you need to move out while repairs are carried out, and liability cover in case someone is injured on your property.
What Is Not Covered?
Buildings insurance does not cover everything. Common exclusions include general wear and tear, gradual deterioration, damage caused by poor maintenance, cosmetic damage that does not affect the structure, damage from pests (woodworm, dry rot, etc. unless specifically included), and damage that existed before you took out the policy.
Some policies exclude or limit cover for certain risks depending on the property's location or history. For example, if the property is in a flood-prone area, flood cover may be excluded, limited, or come with a very high excess. Properties with a history of subsidence may also face exclusions or higher premiums.
How Much Cover Do You Need?
Buildings insurance should cover the full rebuild cost of your property, not the market value or the purchase price. The rebuild cost is the amount it would cost to completely reconstruct the property from scratch, including demolition, materials, labour, and professional fees. This is often significantly less than the market value, which includes the value of the land.
You can find the rebuild cost in several ways. Your mortgage valuation or survey report may include a rebuild estimate. You can use the calculator on the Building Cost Information Service (BCIS) website, which is provided by RICS. For a rough guide, rebuild costs typically range from £1,000 to £2,500 per square metre depending on the property type, location, and specification, but these figures vary considerably.
Under-insuring your property is risky. If your rebuild cost is higher than your insured amount, the insurer may reduce any claim payout proportionally. If you are unsure about the correct rebuild cost, it is better to err on the side of over-insuring slightly.
Choosing a Buildings Insurance Policy
When comparing buildings insurance policies, look beyond the headline premium and consider the following factors:
Excess: The amount you pay towards any claim before the insurer covers the rest. A higher excess typically means a lower premium, but make sure you can afford the excess if you need to make a claim. Subsidence excesses are usually much higher (often £1,000 or more).
Cover limits: Check the maximum payout for different types of claim, including alternative accommodation, trace and access (finding and repairing leaks), and liability cover. Ensure these limits are adequate for your property.
Accidental damage: This is usually an optional extra that covers damage you cause accidentally, such as putting a foot through the ceiling while in the loft or drilling through a pipe. It is worth considering, especially in the first few months of ownership when you are most likely to be doing DIY.
Claims process: Read reviews about the insurer's claims handling. A slightly cheaper premium is poor value if the insurer is difficult to deal with when you actually need them. Check whether the insurer uses their own approved contractors or allows you to choose your own.
Leasehold Properties and Buildings Insurance
If you are buying a leasehold flat, the buildings insurance is usually arranged by the freeholder or managing agent and the cost is included in your service charge. You do not need to arrange your own buildings insurance for the structure, but you should arrange contents insurance for your personal belongings.
Your solicitor should check the buildings insurance arrangements during the conveyancing process. Confirm that the policy covers the full rebuild cost, that the excess is reasonable, and that the freeholder is not paying an inflated premium (and passing the cost to leaseholders). Leaseholders have the right to request a summary of the insurance policy and to challenge unreasonable charges.
Even though the freeholder arranges buildings insurance, your mortgage lender needs to be noted on the policy. Your solicitor will handle this as part of the completion process.