It’s highly likely that your home is the most valuable possession you own. Buildings insurance plays a vital role and offers a reassuring layer of financial protection, should the worst ever happen to your property.
Buildings cover focuses on the structural aspects of your property should it ever be damaged by events such as fire, flood, subsidence, storms, or vandalism. Unlike contents cover (for possessions inside the home) buildings insurance is a compulsory requirement from your lender where the property is backed by a mortgage.
Here’s a closer look at why it’s so important and the steps you can take to keep down the cost of insurance premiums.
What is buildings insurance?
This type of cover is designed to protect your home’s bricks and mortar, plus any permanent fixtures and fittings. This includes your home’s roof, floors, walls, doors and windows. Other features, such as garages, patios, pipes and drains may also be covered, but how far they are insured will depend on which provider’s policy you take out.
What is and isn’t covered?
Typically, buildings insurance will cover eventualities such as: malicious damage; subsidence; fallen trees; fire; flooding; storm damage; water leaks from frozen and burst pipes; and oil leaks from a heating system.
If your property has suffered subsidence at some point, you will probably have an increased excess for any future subsidence claims. The excess is the amount you must contribute towards the cost of any claim - it is normally deducted from the claims pay-out.
The standard excess on a buildings insurance policy might be in the region of £250, but where subsidence is a known risk, this can increase to £1,000 or even £5,000.
Occurrences that may not be covered include: household wear and tear; rot caused by leaking gutters; storm damage that’s affected garages and fences; damage caused by animal pests (such as insects, rodents and birds); and shoddy workmanship.
Exclusions, that is, those instances when a claim is not met by an insurer, will vary from one provider to the next. Make sure you check a policy’s small print thoroughly to see what’s left out.
How are premiums calculated?
Insurers base buildings insurance premiums on the amount it would cost to rebuild the property if it was totally destroyed. This amount is called the ‘sum assured.’
Be aware that this is not the same figure as the property’s open market value, which relates to the price someone might be prepared to pay to buy your home. Generally speaking, at least in London and the south east, the rebuild cost will be lower than your home’s market value or recent sale price, often by a fair factor.
When making their calculations, insurance companies will frame their figures based on their knowledge of the properties in your area, along with the information you provide about the property concerned.
Check your figures
It’s worth checking yourself to ensure the figure accurately reflects the rebuild cost. This will help to avoid ending up under-insured, with the level of anticipated cover falling short should you ever need to claim. By the same token, there’s no point taking out excessive cover as you’ll only end up paying more for it than you need to.
When it comes to working out the ‘rebuild’ cost, one option is to pay a professional to survey your home to provide the most accurate figure. Alternatively, plug your information into the ‘rebuild cost calculator’ provided by the Building Cost Information Service, a service from the Royal Institution of Chartered Surveyors.
If you complete an online quotation, the insurer or comparison site might also provide estimates based on the information you provide.
Shop around for buildings cover
The best way to purchase buildings cover is by going online, shopping around, and comparing policies to find the one that’s most appropriate for your needs.
Once you’ve entered the details of the property in question, you should be presented with a range of potential quotes in just a matter of minutes. Before going ahead and buying a particular policy, it’s worth making sure that you’ve read its terms and conditions.
Check for important features such as ‘alternative accommodation’, where a policy would cover the cost of you and your family staying in a hotel, or rented accommodation, should your property require extensive repair following major damage, such as a fire or flood.
It’s important to find the right level of cover at the best price.
When buying buildings insurance, you may be given the option to bolt on cover in the form of ‘extras,’ such as:
Accidental damage Provides cover if, say, you drill through a water pipe
Legal expenses Helps meet the cost of expert legal assistance for in the case of events such as neighbour dispute
Home emergency Offers extra cover in certain emergencies, such as plumbing issues or drainage problems.
Choose carefully, as each of these add-ons could bump up the price of your premium. Make sure you understand exactly what type of extra cover it is that you are buying.
Under no obligation
Many homeowners assume that, when they take out a mortgage, they are obliged to take out the buildings insurance offered by their lender. This is not the case. Rather than sign up straightaway with your lender, shop around and compare deals to see if there’s an alternative that better suits your needs.
When it comes to keeping down the cost of buildings insurance premiums:
Consider a ‘combined’ buildings and contents policy Discounts often exist for customers who buy both types of cover from the same provider
Avoid monthly premiums You’ll likely end up out-of-pocket compared with making an up-front, annual payment for cover
Cut out the frills Only pay for extra levels of cover you really need
Consider a higher excess The excess is the amount you agree to pay in the event of a claim before the insurance policy kicks in. A higher excess can reduce premiums, but make sure you’d be able to afford it before signing up
Build up a no-claims discount Some providers offer discounts where policyholders refrain from making a claim for an agreed number of years. Consider meeting the costs of minor repairs to achieve this but, again, make sure you’re financially comfortable with any decision you make.
Don’t auto-renew policies
Make a note of when your cover is due to end and be ready to research the market, shop around and, if necessary, jump ship to a rival provider just before the deadline strikes.
Comparing deals and threatening to move away for a better deal is the best way to keep your existing provider on its toes in terms of the value they can offer you.
Beware invalidating your cover
Once you’ve taken out a buildings policy, you don’t want to find you’ve inadvertently invalidated your insurance. Here are some issues to be aware of:
Carrying out home improvements but failing to inform your insurer This can risk invalidating your cover. Almost all policies require the customer to inform the provider of any major structural works, such as extensions, loft conversions, refitted bathrooms, kitchen installations and garage conversions
Unoccupied property Leaving a home vacant for long periods, typically 30 or more days, can also risk invalidating your buildings cover. If you’re planning on being away, raise this with your provider to review the options.