It’s compulsory to have buildings insurance if you have any type of mortgage on your home (including equity release) but even if you’ve paid off your mortgage, you should still ensure you have cover in place.
Lenders insist on you having buildings insurance before they will let you take out a mortgage, so that the value of the asset they are lending on is protected in the event that it is destroyed or damaged. However, you don’t have to take out cover with your mortgage or equity release provider, so it’s a good idea to shop around for the right policy to suit your needs.
You might think that buying buildings insurance would be straightforward, but policies can catch you out in unexpected ways.
None of us wants to spend more money than we have to; especially on something as practical (dull, even) as buildings insurance. Price comparison sites have made comparing deals far speedier than ringing round insurance companies yourself, and they’ve helped bring prices down as well. But if you want to be sure about what you’re buying, you shouldn’t just click on the cheapest policy.
Working out how much buildings insurance you need
Buildings insurance will cover the cost of repairs to your property or a complete rebuild if it’s so badly damaged that it can’t be repaired. That means you don’t need to insure it for the same as its market value.
- If you’re about to buy a property, ask your surveyor to provide a valuation figure for rebuild costs.
- Otherwise, you could use the Association of British Insurer’s Rebuild Calculator. You have to register, but it’s free to do and the calculator is easy to use.
Some homeowners have too much buildings insurance, because they insure their property for the market price. While it’s a waste of money to do that, because you won’t get a higher payout when you claim, you should make sure you aren’t under-insured. If you are, your insurer won’t pay the full amount of your claim.
What to look for
Buildings insurance policies vary widely, so this is not an exhaustive list of what you should look out for. But it should point you in the direction of some clauses that you may not be aware of.
Remember, if you’re shopping around for buildings insurance, always check the excess levels that the quote is based on and ead the individual policy documents so you know what you are and aren’t covered for.
- Trace and access. Most policies include this clause, which means the insurance company will pay for the cost of finding the source of the problem and not just the resulting damage. This is important. If, for example, an underground pipe in your kitchen developed a leak, without ‘trace and access’ you would have to pay for the cost of a plumber digging up your kitchen floor out of your own pocket. Some insurance policies have quite low limits on trace and access (as little as £1,000 – £2,000). Try and get a policy that will pay at least £5,000 for a trace and access claim.
- Alternative accommodation. If your property is seriously damaged, for example by fire or flood, you may need to live elsewhere for several months whilst repairs are carried out. Some insurers have relatively low limits on the amount they will pay out for alternative accommodation. I’ve just had a look at some insurers’ websites and the amounts vary from £20,000 to £100,000 and above. You might be tempted to save money on alternative accommodation costs, but don’t go for an unrealistically low amount. If your home was badly flooded, you could spend well over a year living somewhere else.
- Matching items. This clause is more important when it comes to contents insurance, but it’s still relevant if you’re looking to buy buildings cover. If, for example, you were to damage your bath, but not the basin or toilet (or other bathroom fittings that might make up the set), some policies would only pay for the bath to be replaced and not the other items; even if the style had been discontinued so you couldn’t find one that matched. Some policies will sell ‘matching of items’ cover separately. If not, check the policy documents to make sure you’d be covered or ask your broker or insurance company how they cover matching items.
- How they handle claims. It’s difficult to get direct information about how a company handles claims, although an insurance broker should be able to tell you. You can find out if an insurer has a high number of unresolved complaints to the Financial Ombudsman Service, which is a free adjudication service for consumers. You can also find out if the Financial Ombudsman Service found in favour of the consumer most of the time (which might suggest the company was trying to wriggle out of complaints). It publishes and updates complaints figures every six months.
Find out more
If your current buildings or contents cover is soon up for renewal, you can compare quotes and switch online using our home insurance comparison tool.
Make sure you don’t let your insurer automatically renew your cover when your existing policy comes to an end as you may well be able to find a better deal elsewhere. Find out more about auto-renewals in our article Insurance auto-renewal – is it legal?
If there’s been a problem with your property in the past, perhaps for example, it’s flooded, or it’s had subsidence, you might find you’re refused cover by most high street insurers. However, there are insurance brokers which specialise in finding cover for properties with special requirements, so it’s worth seeking professional help from one of them. The British Insurance Brokers Association (BIBA) can help you find a broker here or you can call them on 0370 950 1790.
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