Buying a new home is a significant milestone. And understanding how home insurance works will help your move go smoothly.
We’ll explore the key areas you should consider, to ensure you’re well-informed along the way.
Why do you need insurance at exchange?
Exchanging contracts is a pivotal moment when you buy a property. This is because it’s when the property transaction becomes legally binding. From this point, the buyer assumes responsibility for the property’s condition.
Once your sale completes, your lender will require you to have buildings insurance in place. Some lenders also require you to have buildings insurance at the point of exchange, and most will strongly advise it. This is because it will protect you against events such as fire, flood, or structural damage.
Managing insurance on your current property
Between exchange and completion, you may need to insure both your current and new properties. You can do this by:
- Maintaining coverage: retain your existing buildings insurance until completing the sale. This ensures you’re protected if your buyer’s insurance fails to provide cover.
- Adjusting policies: if you’re concerned about the cost of dual insurance, consult your insurer. Some providers offer adjustments or discounts during the overlap period. Either way, ensure continuous coverage to avoid liabilities.
- Contents insurance: is important if you move out before completion but leave belongings behind. For example, if you move to your partner’s house and take your things over gradually while the sale goes through. Otherwise, your belongings won’t be covered in the interim.
- Unoccupied properties: if your property is going to be unoccupied for a month or more, tell your insurer. This is because unoccupied properties are at higher risk of being targeted by burglars. Also, issues such as leaks will go undetected for longer in an empty property.
Dual insurance scenarios: Who pays out?
Both you and your buyer may have buildings insurance for the same property between exchange and completion. This ‘dual insurance,’ can lead to issues if you need to make a claim.
Typically, insurance policies contain clauses to handle such overlaps. These often involve dividing the liability between insurers. To deal with any potential issues:
- Policy terms: review your policy’s terms regarding dual insurance. You’ll then know how claims are handled.
- Communication is key: let your insurer know about the sale. Ask them about the implications of dual coverage.
- Coordination with the buyer: discussing insurance with your buyer can clarify liabilities. This can potentially streamline coverage.
Getting buildings insurance without full property details
Arranging buildings insurance before exchange can be challenging. This is because you may not have full information about the property. This includes security features such as locks, security cameras and alarms. To address this:
- Provide available information: share all the details you know with insurers. If certain things aren’t available, let them know and discuss how this may affect your policy.
- Policy adjustments post-move: after you move in and have details, update your insurer. Be aware that changes might affect your premium. However, prompt communication will ensure accurate coverage.
Insuring contents during the move
Protecting your belongings during the move is essential. It’s worth considering:
- Removals company insurance: many removals firms offer insurance for your belongings in transit. Check the extent of this coverage though, as there may be exclusions.
- Personal contents insurance: some home insurance covers items in transit. Review your policy to confirm if you’re covered during the move.
- Claims process: if the removals company damage your property, their insurance is the primary route for claims. If required, make sure you understand their procedures and any information they need.
Adding contents insurance to a buildings insurance policy
If you have buildings insurance and want to add contents insurance after moving, consider:
- Policy integration: many insurers allow you to add contents insurance to your buildings policy. This can often be arranged so they have a common renewal date.
- Pro rata adjustments: insurers may calculate a pro rata premium when you add contents coverage. This will align it with your existing policy term. Say you have an annual buildings insurance policy and add contents insurance three months into the year. Your insurer might work out what contents insurance would cost for the remaining nine months, rather than a year. This means you’d renew both at the same time in the future. It’s worth discussing this with your insurer to understand any financial implications.
Other issues to consider
Some situations differ slightly from the scenarios we’ve looked at so far:
- Cash purchases: if you’re buying a property without a mortgage, there’s no lender requirement for insurance. Nonetheless, insuring your home is sensible to help protect against unforeseen damage.
- New build warranties: newly constructed homes may come with warranties covering structural issues. However, they won’t include additional areas covered by buildings insurance, such as unexpected damage caused by fire, storms, or break-ins. So, it’s still advisable to arrange your own buildings insurance.
- Leasehold properties: in some leasehold arrangements, the freeholder may be responsible for buildings insurance. This is the only scenario where you wouldn’t need separate buildings insurance. Check the terms of your lease to confirm who’s responsible. And even if the landlord is responsible for the buildings insurance, you’ll still need to arrange contents cover.
In conclusion, when you move home, understanding insurance during the exchange of contracts is vital. By addressing this issue, you can ensure a smoother, more secure transition into your new home.
The Society has partnered with Uinsure to provide home insurance. For more information and to obtain a quote please visit the insurance section of our website.
