Building insurance is a type of insurance that provides financial protection to property owners against damage or loss to the physical structure of a building. This insurance covers the cost of repairing or rebuilding the structure of a property in the event of damage or destruction caused by various perils like fire, flood, theft, vandalism, storms, and more. It includes coverage for the building’s walls, roof, windows, fixtures, and fittings, such as bathroom suites, fitted kitchens, and built-in wardrobes.
Building insurance typically excludes coverage for moveable property like office equipment, which can be covered separately under business personal property insurance. Additionally, this insurance may offer optional extensions like accidental damage to the structure, legal expenses coverage, and home emergency assistance. Property owners need to ensure that their building is adequately insured for the rebuilding cost, not the property’s purchase price or market value, to guarantee sufficient coverage in case of a claim.
How Does Building Insurance Work?
When it comes to building insurance, the process allows policyholders to file a claim with their insurance provider in the event of leaks, fires, or storms. Upon receiving a claim, the insurance company assesses the situation to determine if the damage is within the scope of coverage and calculates the financial assistance required to repair or replace the affected property.
Normally, policyholders are responsible for a portion of the claim, referred to as an excess, typically ranging from £50 to £1,000. This excess amount is selected by the policyholder at the time of policy inception, offering a degree of flexibility in determining the level of financial contribution they are comfortable with in the event of a claim.
What Building Insurance covers
- Structural elements: walls, roof, floors
- Permanent fixtures: fitted kitchen cupboards, bathrooms
- Repairs or replacements for:
- Fire damage
- Flood damage
- Storm damage
- Vandalism
- Subsidence
- Water damage from leaking pipes
- Optional coverage for accidental damage
- Additional structure coverage: garages, exterior walls, driveways
What Building Insurance Doesn’t Cover
- Normal wear and tear
- Deliberate damage
- Gutter leaks
- Specific pests: insects, birds
- Frost damage (unless from burst pipes)
- Storm damage to gates and fences
Remember to review your policy thoroughly, as exclusions may vary. For coverage of personal belongings like carpets, furniture, jewelry, and clothing, consider obtaining contents insurance.
Determining the Need for Building Insurance
With a Mortgage
If you have a mortgage, building insurance is typically a requirement tied to the mortgage agreement. The coverage amount should be sufficient to address the outstanding mortgage balance. While your lender may offer insurance options, you usually have the freedom to select your preferred insurer. However, the lender can decline your choice but cannot enforce their insurance unless it is part of your mortgage deal.
It is advisable to secure building insurance when exchanging contracts for a house purchase and maintain coverage until the sale concludes. In the event of home repossession by the lender, you must continue to insure the property until it is sold, informing your insurer of the change in occupancy status.
Without a Mortgage
Although not mandatory, obtaining building insurance is highly recommended for homeowners without a mortgage. Consider the financial implications of rebuilding your home in the event of damage or destruction.
For Leaseholders
Lease agreements may stipulate the necessity of building insurance with a specified insurer, or the freeholder might procure insurance and pass on the costs to you.
For Renters
Typically, landlords secure insurance; however, tenants may be accountable for fixture and fitting damage. Household contents insurance may provide coverage in such instances.
Determining the Adequate Building Insurance Coverage
Assessing the Required Coverage
Ensuring you have the appropriate level of building insurance is crucial. It is essential to insure your property for the amount needed to completely rebuild it, known as the sum insured. The rebuilding cost differs from the purchase price or current market value of your home. Typically, rebuild costs are lower than market value, so it’s vital to avoid both underinsuring and overinsuring.
Calculating Rebuild Costs
To determine the rebuilding expenses accurately, you can utilize the Building Cost Information Service online calculator available on the Association of British Insurers’ website. Some insurers provide unlimited coverage, eliminating the need to calculate rebuild costs. However, if you are aware of these costs, it might be cost-effective to explore policies tailored to your specific requirements.
Reviewing Coverage
Certain policies estimate the sum insured based on general factors like location, property type, and age. However, this generic assessment may not align with your property’s unique characteristics, necessitating a thorough evaluation to ensure adequate coverage.
Regular Evaluation
It is advisable to periodically review your building’s insurance coverage, as rebuild costs typically escalate over time. Some insurers offer policies that automatically adjust the sum insured in line with rising rebuild costs.
Property Enhancements
Any enhancements to your property, such as extensions or loft conversions, can increase rebuild costs. It is essential to update your coverage accordingly to accommodate these changes.
Special Property Features
For properties with distinctive features like a thatched roof or listed status, obtaining a survey from the Royal Institution of Chartered Surveyors can help assess accurate rebuild costs.
Strategies for Obtaining Affordable Building Insurance Quotes
Seeking cost-effective quotes:
While insurers are mandated to offer consistent pricing to both new and existing clients, it is advisable to explore potential savings by considering a switch rather than opting for automatic renewal.
Additional Tips for Cost Savings
- Bundle Buildings and Contents Insurance: Consolidate both types of insurance under a single policy if required.
- Opt for Annual Payments: Choosing to pay annually is typically more economical than monthly installments.
- Adjust Excess Amount: Consider increasing the excess if you are comfortable bearing a higher portion of any claim expenses.
- Enhance Home Security: Improve security measures by installing BSI-approved locks on doors and windows, burglar alarms, and smoke alarms, and consider participating in a neighborhood watch program.
- Review Existing Coverage: Evaluate any existing insurance coverage, as some current account packages may include emergency repair or lost-key assistance.
By implementing these strategies, you can potentially secure more affordable building insurance quotes without compromising on essential coverage.
Obtaining Building Insurance Quotations
Securing insurance quotes
Insurance providers may offer varying prices, underscoring the importance of obtaining multiple quotes for comparison.
Sources for Insurance Quotes
- Comparison Sites: Utilize comparison platforms to receive quotes from numerous insurers by entering your information once. Refer to guidelines for using comparison sites and recommended platforms like MoneySavingExpert for cost-effective options.
- Direct Contact with Insurers: Some insurers, like Direct Line, may not feature on comparison sites, so consider reaching out to them directly.
- Insurance Brokers: Engage with insurance brokers for personalized advice or tailored policies. Understand when it is beneficial to involve an insurance broker in your search.
Selecting the Right Policy
While cost is a significant factor, prioritize selecting a policy that meets your specific needs, even if it entails a slightly higher premium. Opting for the most affordable deal may not always equate to the most suitable coverage.
FAQs
What factors can affect the cost of building insurance?
The cost of building insurance can be influenced by various factors, such as the property’s location, rebuild value, security measures in place, previous claims history, and the level of coverage selected. Insurers consider these factors when calculating premiums.
Is building insurance mandatory for all homeowners?
While building insurance is typically a requirement for homeowners with a mortgage, it is not legally mandatory for all property owners. However, it is highly recommended to protect your investment and ensure financial security in case of damage or loss to the property.
Can I make changes to my building insurance policy during the coverage period?
Yes, you can usually make changes to your building insurance policy during the coverage period. This may include adjusting the coverage amount, adding optional extras like accidental damage cover, or updating details about the property. It’s advisable to contact your insurer to discuss any modifications you wish.