Do You Need Building Insurance Before Exchange?

If you buy a house using mortgage finance, you will almost certainly need building insurance when you exchange contracts. This is because in the UK, the buyer becomes legally responsible for the property at exchange, not completion.

Most mortgage lenders insist on building cover at this stage to protect their investment. Even if you’re a cash buyer, it’s a smart move to protect your future home with adequate insurance.

Here’s a quick guide on building insurance essentials – including when you need it, what’s covered, invalidated policies, and related insurance types.

What Is Buildings Insurance?

Buildings insurance insures the structural parts of your home, including walls, roof, floors, windows, and permanent fixtures (e.g., fitted bathrooms and kitchens). 

The policy provides financial protection to cover repair and rebuild costs in the event of damage by:

• Fire
• Flood
• Storm
• Subsidence
• Vandalism or malicious damage

Insurance providers include alternative accommodation cover to pay for temporary accommodation if you’re unable to live in the house due to damage covered by insurance.

Note that the insured amount is more closely tied to the rebuild value – the cost estimates to completely rebuild the property – than its market value or purchase price.

Does building insurance cover home contents?

• No, building insurance doesn’t cover home contents like furniture and TVs or personal belongings like clothes, jewellery, and tech. You need a separate policy – called contents insurance – to protect these valuables. Contents insurance is not compulsory.
• Many insurers combine buildings and contents insurance in one comprehensive home insurance package.

Does building insurance cover cracks or boundary walls?

• Yes, if the cracks result from an insured event like subsidence. Boundary walls and fences may also be covered, although limits and conditions often apply depending on the insurer.

Do You Have to Get Building Insurance When Buying a House?

Building insurance is not a legal requirement when buying a home, but it is generally compulsory if you get a mortgage to fund the purchase.

Let’s look at the different scenarios:

When you buy the property for cash and don’t raise a mortgage on it:

• Building insurance is not mandatory. Of course, cover is highly recommended. Unexpected disasters can strike at any time, and without insurance, you’d be liable for the full rebuild costs.

When you take out a mortgage to purchase your home:

• Building insurance is almost always mandatory in this case. Lenders include it as a condition of your loan, and you can understand why. Your mortgage provider likely loaned you the lion’s share of the purchase price. They have a sizeable financial stake in the deal and want to protect the asset securing your mortgage.

When you buy a leasehold property using a mortgage:

• For leasehold flats, the freeholder usually arranges buildings insurance for the entire property. As a leaseholder, you typically contribute your share through the service charge. Your mortgage lender may want a copy of the property’s insurance to note their interest.

When to Arrange Building Insurance

Your building insurance policy should start on the day you exchange contracts. It’s worth underlining this because many homeowners believe cover is only necessary upon completion or when they move in.

When you exchange contracts, the sale becomes legally binding. From this point onwards, you, as the buyer, are responsible for the property. If the structure is damaged after the exchange, the risk lies with you, not the seller

Holding building insurance between exchange and completion has saved many new property owners from financial disaster.

As far as when to get building insurance when buying a house, we encourage homeowners to start arranging quotes and deciding on a policy as soon as the offer is accepted. This helps avoid last-minute delays that could hold up the exchange.

What’s not Covered by Buildings Insurance

While building insurance offers vital protection, it doesn’t cover the cost of all structural issues. Common exclusions include:

• General wear and tear
• Disrepair through neglect or poor maintenance
• Damage caused by pests (e.g., rodents, termites)
• Poor workmanship
• DIY disasters
• Unique features like a thatched roof may need specialised coverage.

Always read the policy documents carefully when assessing building and home insurance. Coverage and exclusions can vary significantly between insurers.

What Can Invalidate a Policy?

Know that certain actions (or inactions) can compromise your cover and even invalidate your policy. These include:

• Providing incorrect information to your insurer.
• Failing to report renovations or structural changes.
• Leaving the property unoccupied for extended periods without notifying your insurer.

Always keep your insurer updated and make certain all details provided are accurate. That way, you know that when you make a claim, you shouldn’t experience problems or delays receiving your payout.

Building Insurance for Buy-to-Let  (Landlord Insurance)

If you’re purchasing a property to rent out, you cannot use a standard building insurance policy.

Buy-to-Let properties need specialist landlord buildings insurance designed to cover rental-specific risks, such as:

• Liability claims from tenants.
• Loss of rent caused by an insured event.
• Malicious damage by tenants.

Other Types of “Mortgage Protection” Insurance

Besides landlord’s and property-related policies, there are a few other insurance types associated with residential mortgages.

• Income Protection is insurance designed to replace a portion of your monthly income if you are unable to work due to illness or injury.
• Critical Illness Cover provides a one-off lump sum payment upon diagnosis of a serious illness.
• Life Insurance helps protect the mortgage/your family’s home if you die.

While none of these are mandatory, they can help reassure you that mortgage payments will be maintained in difficult times.

Get Expert Help Before You Exchange

Building insurance can seem like a small detail in the buying process, but it’s an essential step in protecting your new home. Flagstone’s independent insurance advisors can help you compare policies, understand what each policy covers, and ensure your lender’s requirements are met. Get in touch for clear, impartial guidance on arranging the right cover before exchange.