Property and buildings insurance covers the cost of rebuilding your home or commercial property if it has been damaged or destroyed in almost any way. Usually, this type of insurance is compulsory if you are planning on buying a property with a mortgage. In fact, you may not actually be able to obtain a mortgage if you do not take out property and buildings insurance.
Also, as a landlord or the nominated person taking care of a property’s block management services, it is important to understand these policies; when they apply, when they are needed and the levels of cover you should consider.
What is Property and Buildings Insurance?
Taking out a property and buildings insurance policy will cover the property and the structure of the property itself against potential risks such as fire, explosions, theft, vandalism, frozen and burst pipes. This also includes damage incurred via things like fallen trees, lampposts aerials or satellite dishes and some other forms of weather damage, as well as vehicle and aircraft collisions.
There are also specific kinds of property insurance and these types of policies can range to include some more specialised forms of insurance such as:
- Home Insurance
- Flood Insurance
- Fire Insurance
- Earthquake Insurance
- Boiler Insurance
Under property and buildings insurance, your garage, sheds and fences are also covered, as are the costs of replacing cables, drains or pipes. If your property has been destroyed to the point it needs rebuilding, the insurance will cover the costs of demolition, site clearance and the architect’s fees.
Do I Need Property and Buildings Insurance?
Property and buildings insurance will usually be a condition of a mortgage when looking to buy a property and must therefore cover enough to at least cover your outstanding mortgage value should something happen to the property. The mortgage provider will typically give you the choice to pick your insurer and your package. However, be aware that the mortgage provider can reject your choices and decline your loan. Nevertheless, they cannot make you use their own insurance policy unless the mortgage is intertwined with it.
When you buy a property, you should aim to take out property and buildings insurance from the moment you exchange contracts so that you are covered from day one. Likewise, if you are selling your property you should keep your insurance rolling as you are responsible for the property until the sale has been completed. This is always the case – if your house is repossessed, you are still responsible for insuring it until it has been sold on.
If you do not have a mortgage, it is still advisable to take out property and buildings insurance, but it is not compulsory. You must consider whether you can afford to rebuild your property or home if it were to be damaged and destroyed for any given reason without insurance.
If you are a tenant, you needn’t worry, as the owner of the property; your landlord will be responsible for taking out this insurance. You may however be held responsible for any damage to fittings or fixtures but if you have household contents insurance, any damage may be covered by this. it is therefore important to check with your provider.
Also important to consider is that different types of properties and premises require specifically different categories and levels of cover and that prices of policies can vary based on the values of a property and building. For example, commercial premises in prime locations such as hairdressers in Central London or an office block in Canary Wharf can reasonably expect their policy to be more expensive than that of an equivalent premise in Hertfordshire for example.
How Much Insurance Cover do you Need?
It is advisable to make sure you cover yourself for the amount it would cost to completely rebuild a property in your possession; this is known as ‘sum insurance.’ Be aware that the cost of rebuilding your home will not be the same amount you paid for it or its current market value if you were to sell it. Rather, the cost of a rebuild is usually less than the current market value, so do not end up paying out too much or too little insurance-wise.
If you need help working out the cost of rebuilding your home should it ever come to it, the Association of British Insurers have provided a Building Cost Information Service online calculator for your convenience that can help you estimate the value required.
In some cases, insurers will simply offer unlimited cover so that there is no need for you to work out the cost of a rebuild. Furthermore, some providers will work out the sum insurance based on a general assessment, looking at where you live and the type of property as well as its age.
Keep in mind that if you make any changes to your property, such as an extension, this will drive up the cost of a rebuild and you will have to make sure you are covered for this by forking out a little bit of extra cash. In saying this, you should aim to keep on top of your insurance policy by regularly reviewing the amount it would cost to rebuild as time goes on as the costs do tend to rise over time. You can opt to take out a policy which will increase the sum insurance automatically as it changes organically.