Do I have to insure the property before I buy it?
Posted on 12th July 2024
Purchasing a property is a significant milestone, whether it’s your first home, an investment, or a holiday retreat. One critical aspect that cannot be overlooked when buying a property, is arranging property insurance. Insuring your new property protects your investment, and often your family home, against a range of potential risks, ensuring your peace of mind and, in many cases, the requirements of your lender are complied with. Here’s a guide on property insurance in England and Wales when buying a property from our expert Conveyancing Solicitors in Lytham.
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Understanding the Types of Property Insurance
There are several types of property insurance you may need depending on your circumstances:
Buildings Insurance:
Covers the structure of your home (walls, roof, floors) and permanent fixtures (such as fitted kitchens and bathrooms) against risks like fire, flood, subsidence, and theft.
Contents Insurance:
Protects personal belongings within your home, including furniture, electronics, and clothing, against theft, fire, and other perils.
Combined Buildings and Contents Insurance:
A comprehensive policy that includes both buildings and contents insurance, often at a discounted rate compared to buying them separately.
Landlord Insurance:
If you are buying a property to rent out, this insurance covers buildings and contents, landlord liability, and loss of rental income.
Specialist Insurance:
Additional coverage for properties with unique risks, such as listed buildings, properties in flood-prone areas, or second homes.
Commercial Property Insurance:
Commercial property insurance is essential for business owners to protect their physical assets. It includes coverage for
Building and Contents:
Protects the physical building and its contents, such as equipment, furniture, and inventory, against various risks.
Business Interruption:
Covers lost income and operating expenses if your business is temporarily unable to operate due to a covered event.
Liability Coverage:
Protects against legal claims arising from injuries or damages occurring on the business premises.
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When to Arrange Property Insurance
The 'Standard Conditions of Sale (5th Edition) - 2018 Revision' is the most common contract of sale used by conveyancing solicitors.
Clause 5.1.1 states that:
"... responsibility for the insurance of the property is passed to the buyer with effect from the moment contracts are exchanged."
If you are taking out a mortgage on your new home, your lender will also require you to have buildings insurance in place at the point of exchange. If something happens to the property between exchange and completion, the mortgage lender’s equity is not protected without insurance.
The Law Society’s wording on standard conveyancing practice states that, under most circumstances, ‘The property is at the risk of the buyer from the date of the contract (exchange).’
Any conveyancing solicitor worth their salt will advise you that it is absolutely essential to arrange property insurance before contracts are exchanged on your new property. The exchange is the point at which the sale becomes legally binding, and from this moment, the buyers are responsible for the property. Not having insurance in place could leave you vulnerable to significant financial loss if something were to happen to the property before completion. When a mortgage lender is involved with the purchase, they will require that the property is insured in line with their requirements from the point of exchange, so our Conveyancing Solicitors in Lytham will ask for a copy of your policy, before we proceed to this stage.
Choosing the Right Coverage
Selecting the appropriate insurance involves understanding your specific needs and the property’s characteristics:
Evaluate the Property:
Consider factors such as the property’s age, construction type, location, and any unique features that may affect your insurance needs.
Assess the Value:
Accurately estimate the rebuild cost of the property (for buildings insurance) and the value of your personal belongings (for contents insurance). Many insurers provide online calculators to assist with this.
Identify Risks:
Determine potential risks such as flood zones, subsidence history, or proximity to water bodies. Specialist coverage may be needed for high-risk properties.
Comparing Insurance Providers
Conveyancing solicitors are not insurance brokers, and we aren’t the people to ask about the insurance that suits you, and your new property. What we can tell you, is that you need to search for the best deal for you. To get the best deal, compare quotes from multiple insurance providers. Factors to consider include:
Coverage Limits:
Ensure the policy provides adequate coverage for the rebuild cost of the property and the value of your belongings.
Excess Amounts:
Check the excess (the amount you pay towards a claim) and ensure it’s affordable.
Additional Features:
Look for additional benefits like accidental damage cover, legal expenses, and home emergency cover.
Customer Reviews:
Research customer reviews and ratings to gauge the insurer’s reputation for customer service and claim handling.
Legal Requirements and Lender’s Conditions
Our conveyancing solicitors are on most, if not all mortgage lender’s panels, so no matter your lender, we have probably acted for them many times before, and will be able to accept instruction from you, on your property purchase. We are also certain that, as explained above, if you are taking out a mortgage, your lender will likely require buildings insurance as a condition of the loan. This ensures their investment is protected. Check your mortgage agreement for any specific insurance requirements and ensure your policy meets these criteria.
Specialist Considerations
Some properties may require specialist insurance considerations:
Listed Buildings:
Historic properties often need tailored insurance due to their unique construction materials and methods.
Flood-Prone Areas:
If your property is in a flood risk area, standard insurance may not cover flood damage, and you might need to obtain flood insurance from a specialist provider.
Second Homes:
Holiday homes or second properties typically need bespoke coverage due to extended periods of un-occupancy.
Often, you may decide to seek the advice of your mortgage broker, or a qualified insurance advisor, on what policy could suit your property needs. Our Conveyancing Solicitors in Lytham hold the prestigious Conveyancing Quality Scheme accreditation, and are SRA-regulated; so, whilst we are your local specialists in Conveyancing and property law, we are not specialists in advising on insurance, so cannot assist with this aspect of your new purchase.
Reviewing and Maintaining Your Policy
Once you have secured your property insurance, it’s important to:
Regularly Review:
Annually review your policy to ensure it still meets your needs, especially if you make significant changes to the property or acquire valuable items.
Update Your Insurer:
Inform your insurer of any major renovations, changes in occupancy, or alterations that could affect your coverage.
Stay Informed:
Keep abreast of any changes in insurance regulations or risk factors that might impact your policy.
Understanding the different types of property insurance is essential for protecting your assets and ensuring financial stability in the face of unexpected events. Whether you are a homeowner, renter, landlord, or business owner, there is a property insurance policy designed to meet your specific needs. Evaluating your risks and consulting with an insurance professional can help you choose the right coverage to safeguard your investments and provide peace of mind. Our Conveyancing Solicitors in Lytham will guide you throughout the process of buying your new property, and let you know at which stage you should start looking for satisfactory insurance for your property. If you have any questions throughout the property-buying process, contact your dedicated solicitor on 01253 202 452.
Our SRA-regulated Conveyancing Solicitors in Lytham are also CQS-accredited, a true mark of excellence in the Conveyancing area of law, and a testament to the hard work and knowledge of our team. Don’t just take our word for it; you can read our client’s reviews, here, or speak to our Conveyancing Solicitors in Lytham for yourself on 01253 202 452 to find out why so many clients choose MG Legal.
Why choose MG Legal, Conveyancing Solicitors in Lytham?
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