Conveyancing: The Importance of Buildings Insurance
Owning a home is a dream for many, but protecting that dream with buildings insurance is an essential step often overlooked. Timms Conveyancing Solicitor, Connor Ball-Wood discusses the importance of buildings insurance in his latest blog…
What is Buildings Insurance?
Buildings insurance is vital as it is the policy that will cover you against the risk of the property being damaged by fire, storm, flood and the like.
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’. The date of contract is better known as the date of exchange. If you are buying a leasehold property, insurance is usually arranged by the Landlord or Managing Agent, and they will provide a copy of the policy to your Conveyancer.
As a Buyer, you should make sure that you know the reinstatement cost of the property e.g. the cost of rebuilding the property, and this is usually set out in your mortgage valuation report or survey. You need to know this figure so that you can arrange adequate insurance and, so you can check that any existing insurance in respect of a leasehold property is adequate.
If you are buying the property with the aid of a mortgage, then your Lender will set out their insurance conditions; including the risks which must be covered in your mortgage offer. However, all Lenders will insist that the amount of cover is a minimum of the cost of rebuilding the entire property if it is damaged e.g. by fire.
It’s not always plain sailing…
There are a number of factors which could make obtaining insurance unusually difficult. Factors including flood risks; historic subsidence claims; contaminated land or past coal mine entries within the vicinity of the property to name a few. Many of these risks would be highlighted in an Environmental Search Report which will be ordered by your Conveyancer during the transaction. If certain risks are highlighted, then any Lender would usually at the very least need assurances that you would be able to insure the property on normal terms in light of the risks.
As mentioned above, you must insure the building upon exchange of contracts. You must then provide a copy of your policy to your Conveyancer prior to completion. If you are having a mortgage, then unless insurance is in place, your Conveyancer cannot draw down your loan.
It is important to make enquiries regarding your building’s insurance early on in the transaction. Making sure that insurance is available on acceptable terms, and that you speak to your Conveyancer should you be unable to insure a property that you wish to purchase.
March 2024