When you are buying a property, you may be asked to provide a copy of your buildings insurance when you are nearing to the point of exchange of contracts.

As the buyer, why do you need to provide this and what is the point of buildings insurance?

Why is it important to have buildings insurance?

It is important to have buildings insurance in place from the point of exchange of contracts. The reason for this is simply because your financial liability for the property begins at that time. This will also protect any beneficial interest of your mortgage lender should you be obtaining a mortgage to assist you in your purchase.

Exchange of contracts is the time the contract becomes legally binding, setting the completion date and you will become liable for 10% of the purchase price should you withdraw from the purchase.

Whilst it is likely that the seller will keep buildings insurance whilst they remain living at the property, or if it remains a requirement of their mortgage, they are not legally obligated to. The standard conditions of sale contained within the contract state that the ‘property is at risk of the buyer from the date of the contract’ therein the responsibility falls to the buyer. It is recommended that you protect your financial interest should anything happen at the property between exchange of contracts and the legal completion date, maintaining a suitable policy throughout your ownership.

What is the point of buildings insurance?

If you are purchasing without the assistance of a mortgage, it is strongly recommended you take out building’s insurance but you are not legally obligated to. If you are buying with the assistance of a mortgage, then you will likely find in it a condition within your mortgage offer that a policy is obtained from exchange and maintained throughout the lifetime of the loan. Your offer will specify the conditions of which the policy must comply with.

You should ensure that as a minimum, the reinstatement cost of the property is covered by the buildings insurance. This amount can usually be found within your mortgage offer or survey report.
We would recommend that you obtain quotes for buildings insurance earlier in the transaction to establish if the property is subject to any unusual or high premiums due to the location or specific risk within the area. You are also responsible for ensuring that any matters reported to you throughout the conveyancing process are disclosed to your insurer to ensure that sufficient cover for possible risks is provided.

Next Steps...

If you would like any advice, please call me on 01530 564498 or email l.bourne@timms-law.com

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