Home insurance, whether it is buildings and/or contents, can often feel like an expensive inconvenience to arrange, not least when you are in the middle of an expensive and stressful house buying process. It might be tempting to put it off to the last minute when you are up to your eyes in navigating calls from estate agents, discussions about dates for exchange of contracts, completion, arranging removals and reading the ‘report on title’ that your solicitor has sent to you.
The report on title can be a daunting document for a buyer and the temptation can be to flick through it, sign the documents enclosed with it and just get to the completion of the house sale as quickly as possible. Believe it or not, the report on title is something that you should read before signing the contracts on your new home. Your solicitor will have prepared it after considering all of the information provided to them by the Seller’s solicitor together with the searches that you have paid for. The report might give rise to questions that you might not otherwise have considered, but it should certainly contain information that you need to be aware of, to include information about insurance.
If you are buying with a mortgage, you will have been told by your mortgage company that it is a condition of your mortgage offer that buildings insurance covering the full reinstatement value of the property is put in place. Understandable, but from when?
It would be easy to assume that insurance should be in place from completion of your purchase of a property, when the money changes hands and you finally get the keys. This is not the case.
In a residential property transaction, the Standard Conditions of Sale (Fifth Edition) provide that the risk in a property passes to the buyer once contracts have been exchanged (unless the contract provides otherwise – this position can be negotiated). The contract will usually require a buyer to complete for the full purchase price even if the property is damaged or destroyed between exchange of contracts and completion – it can and does happen!
So, what does that mean for insurance cover?
A buyer should ensure that insurance is in place in readiness for exchange of contracts. This is the step before the completion of the purchase and there can be quite a gap in time between exchange of contracts and completion of the sale. It would also be prudent to ensure that the policy you choose will cover the cost of rebuilding the property if it is destroyed between exchange and completion. Whilst a seller with a mortgage will likely continue their own insurance policy until completion to comply with their own mortgage terms and conditions (to insure), if they do not have a mortgage there is no obligation for them to do so if they had a policy in place at all. Indeed it is thought that around 25% of households in the UK do not have insurance cover in place.
Don’t take the risk when the risk passes!
Any questions on house insurance, damage caused by trees or issues that crop up involving invasive species during the sale process then get in touch.
