Unlike car insurance, home insurance is not a legal requirement but if you don’t have cover in place for your home, you could leave yourself extremely vulnerable.
Buying a house is likely to be one of the biggest financial transactions you will make in your lifetime, so shouldn’t the very next payment be for the insurance?
Why we recommend home insurance:
We always recommend that you get home insurance in place as soon as you have exchanged contracts. The reason for this is that exchange of contracts legally binds you to buy the property, but if something happens to that property between exchange and completion do you still have to go ahead with the purchase? Yes!
Example:
Mr and Mrs Jones instruct their solicitor to exchange contracts on 1st March for completion on 15th March. There is a bad storm on 8th March and the property gets struck by lightning and burns down, very unfortunate, but Mr and Mrs Jones have exchanged and are still legally required to buy that property and complete on 15th March. They cannot move into the property in its current condition but will be in breach of contract if they do not complete. So, what should Mr and Mrs Jones do?
Option A:
Mr and Mrs Jones put their insurance in place as soon as their solicitor told them they had exchanged contracts. The insurance company, depending on the terms of the policy, will now be placing Mr and Mrs Jones in alternative accommodation, and will be looking to rebuild or repair the damage to the property and Mr and Mrs Jones will move in once the property is fixed.
Option B:
Mr and Mrs Jones did not put their insurance in place after exchange, they did not see the point in spending the extra money when they were not even living in the property yet. They were going to do it on completion, but now the property has burned down, they have already started paying the mortgage and have no funds to rebuild or repair the property. They have a big mortgage and now also need to find alternative accommodation at an added cost.
Luckily, Mr and Mrs Jones listened to their solicitor and took out their insurance the day of exchange.
Whilst it is incredibly rare for something like the above example to happen, it does happen. Things such as flooding, issues with the roof, pipes bursting, faults with the electrics, these are all very real things that could potentially prohibit buyers from moving in on completion day.
I am a cash buyer; do I need insurance
We always recommend you take out insurance irrespective of your financial situation, however the situation is slightly different for cash buyers. We do not need to see insurance policies or quotes from cash buyers, because they will own the property outright and so have the freedom to choose to insure or not. However, if something does go wrong with the property you will need to fund repairs from your own pocket.
I have a mortgage; do I need insurance?
Yes. Those who have a mortgage, will be required by their lender to put insurance in place on exchange and completion.
The lender needs you to protect their investment so that a) you can move into the property and start paying the mortgage and b) the property can be sold at a later date.
Most lenders stipulate that home insurance is a necessity and if you do not put insurance in place, you could be in breach of your mortgage conditions and the terms of your contract conditions on exchange.
Things we look for:
When we ask you to provide an insurance quote or policy, we do no give advice on the policy, but we do check over several things;
- That the property is not blacklisted, and you are able to actually insure the property.
- That the premiums are not excessive and if there are any obvious reasons for this that has not previously been made clear. For example, the property suffers from subsidence and the sellers, or their solicitors haven’t declared this.
- That you intend to look at insurance policies and in doing so comply with the conditions of your mortgage offer
If you are buying property which is not a standard property, different insurance policies may be required such as:
- High value property
- Repossession property
- Property that is being renovated
- Unoccupied property insurance
If you are unsure about the type of insurance you need, we recommend you talk to an insurance broker who will be able to advise you accordingly.
How we can help
At Oliver & Co Solicitors we are proud to have a highly experienced Property team who are dedicated to making your transaction as hassle-free as possible.
If you are currently looking to buy or sell a property and would like expert advice, call our friendly and professional team today on 01244 312306 and we will be happy to advise and assist you in your new venture.
