It’s a great feeling, turning the key in the lock to your new home for the first time. And whether you’re renting or have bought your own property, no doubt you’ve had to deal with a certain amount of stress to get to this point. But the hard part is almost over – contracts have been signed, all of your worldly possessions have been packed up ready for the move, and you’re now ready to start making your house a home.
But before you move in, it’s important to make sure your belongings are protected by making sure you have the right insurance in place for your new home. To help you make sure you have the right cover in place, here’s a guide to the different types of home insurance available.
If you’re purchasing your new home, then you’ll need to make sure that you have buildings insurance in place from the date of completion – this is the date that all final mortgage funds are transferred, and you can finally pick up the keys to your new home. Remember, from this date you’re now financially responsible for the property, and so will be liable for any losses should the unexpected happen, such as a fire or flood. Most people don’t have that sort of money just lying around, so it’s a good idea to have buildings insurance in place to make sure you’re not left out of pocket.
Buildings insurance will cover the cost of rebuilding or repairing the structure of the property (as well as any fixtures and fittings) against a number of different risks, usually including:
- FLEA (fire, lightning, explosion, earthquake and aircraft) – if you have FLEA only cover, then these are the only risks that will be covered under your policy. However, you may still have public liability included.
- Storm and flooding
- Theft, attempted theft and vandalism
- Frozen and burst pipes
- Fallen trees, lampposts, aerials or satellite dishes
Bear in mind that your buildings insurance will only cover the property for fortuitous events (an unforeseen event that occurs by chance or accident, such as extreme weather), rather than wear and tear or maintenance issues. This means that it’s up to you to keep an eye on the property for general maintenance problems, such as mould, as you will not be able to make a claim for this under your buildings insurance.
You might also want to keep an eye on your excesses (the amount you are responsible for paying in the event of a claim), as some insurers may increase or decrease your excesses for certain risks - for example, if your house sits in a high risk flood zone, then they would probably look to increase your flood excess to around £1,000. However, details such as flooding or subsidence in the local area will most likely have been raised in the survey report before you purchased the property, so you should already be aware if this is likely to affect your buildings insurance.
If you have any outbuildings, such as a garage or bike shed, check your policy documents to see whether these structures are covered under your buildings insurance. Any personal possessions being kept in them, such as bikes or gardening tools, would more likely be covered under a contents insurance policy.
But it’s not just financially savvy to make sure you have suitable insurance in place when purchasing a property - it will also usually be a requirement for your mortgage to have buildings insurance in place from the date of completion. After all, your mortgage provider would lose out financially as well if the property were to be badly damaged and you were unable to afford to make the repairs or repay your mortgage.
With this in mind, your mortgage lender may ask you to add them as a ‘note of interest’ to your insurance policy. However, this is actually falling out of practise among lenders and insurers, as ‘noting’ the lender’s interest on an insurance policy doesn’t actually give them any rights under the policy itself – the insured still has the right to cancel or amend the policy as they see fit. But if your mortgage lender does ask you to note their interest on the policy, just mention it to your insurance consultant who should be able to arrange this.
Rebuild value vs. buildings sum insured
When taking out buildings insurance, you will be asked to provide a rebuild value for the property. Bear in mind that the rebuild value will often be less than the price you paid or the property, as the rebuild figure will only consider the cost of the bricks and mortar, rather than the other factors that might affect the value of your home (such as proximity to good schools or transport links). This figure will sometimes be included on the survey report, but if not then the Association of British Insurer’s provides a handy rebuild calculator which will give you a rough idea of the rebuild value of your home.
Once you have your rebuild value, your insurer will then offer you a buildings sum insured for your insurance policy, which is usually a percentage increase on the rebuild value to factor in inflation should the cost of rebuild unexpectedly increase – for example, a rise in the price of bricks.
Freehold vs leasehold
If you are the freeholder of the building – so you own the entire structure of the building and surrounding land as outlined in the title deeds – then you are responsible for insuring it. If you’ve purchased a house or a whole block of flats, then you are more than likely the freeholder of the property and will be responsible for arranging buildings insurance. If you are a landlord, then you may want to consider specialist landlord insurance as this will cover the additional risk of the property being tenanted.
If you are a leaseholder (for example, if you’re purchasing just one flat in a block) then you will generally not be responsible for insuring the buildings, as this would be the responsibility of the freeholder of the entire block of flats. However, as a leaseholder you will need to consider whether you need contents insurance for your personal possessions.
Whether you’re renting the property or have purchased your new home, remember that your personal possessions (such as your clothing and furniture) won’t necessarily be covered under your buildings insurance. With this in mind, you may need to have a look into arranging contents insurance for your new home. Essentially, if you picked up your home, turned it upside down and shook it, anything that falls out is what would need to be covered under your contents insurance. Although it’s worth keeping in mind that carpets and floor coverings are usually considered as contents too – so it’s best to check with your insurance provider for a full list of what’s covered. If you’ve already arranged buildings insurance, then you can usually have contents cover added on to your existing policy. Alternately, if you don’t require buildings insurance (if you’ve purchased a flat, or are renting the property) then you can take out contents insurance as a standalone policy.
Bear in mind that your contents insurance policy might not cover accidental damage as standard – so if you spill a bit of wine on the sofa, this won’t necessarily be covered under your contents insurance policy. However, you can usually add this cover to your policy for a small additional premium to put your mind at ease. Equally, if you’re renting out the property then it might be a requirement of your tenancy agreement to have tenants' liability insurance (TLI) cover in place. TLI essentially provides cover for any damage a tenant might cause to the landlords’ belongings in the property, and will usually be included as standard as part of a contents insurance policy. Check your policy documents to see what’s covered.
You will usually need to provide a total sum insured for your contents (the cost to replace all of your belongings in the event of a total loss), and your insurer may apply a ‘single article limit’ to the policy. This means that they will not cover any items over a certain value. If you have any higher value items, then you may need to include it as a ‘specified item’ on your policy. Equally, if you have any musical instruments or bikes, you might want to consider arranging specialist insurance cover as they may not be covered under a standard contents insurance policy.
You might also want to check the geographical limits of the policy. The ‘geographical limit’ outlines where in the UK (or the world) your contents will be covered, and how long for. If you’re heading off on holiday, for example, then check whether your items are covered abroad. If you have any expensive gadgets that you’ll be taking out and about with you on a regular basis, consider whether you need specialist gadget insurance to cover these items.