Do I have to get buildings insurance from my mortgage provider?

If you're buying a house, buildings insurance is probably the last thing on your mind. But getting on top of it could save you money – here's how.

Chris King

From the Home team

minute read

posted 31 MARCH 2020

Do I need buildings insurance?

Buildings insurance isn't a legal requirement, but if you have a mortgage then it's likely to be a condition of the loan.

What does buildings insurance cover?

Buildings insurance could offer cover if your house is damaged by flood, fire, storms, subsidence or malicious damage, among other things. Although the law doesn't say you have to have it, it's a very good idea nonetheless.

I'm moving house – when do I need to have my buildings insurance in place?

Some 42% of house buyers believe – wrongly – that cover isn't necessary until a house purchase is completed, when in fact you need it from the date contracts are exchanged. So, you should make sure your buildings insurance is in place for when you exchange contracts, as that's when the property becomes your legal responsibility.

If you're looking to insure a house that you're planning to exchange on, make sure you've got all the details you need to hand for the quote, for example:

the address
when the property was built
what materials the property is built from
whether there are smoke alarms, and so on.

Some of this information will be available in your survey and legal documents, but you may need to check things like smoke alarms for yourself.

If my buyers have to get insurance on exchange, does this mean I can cancel the buildings insurance on my current property?

No, we would strongly advise against this. When exchange of contracts happens, you're in a legally binding contract to purchase/sell the house. If your buyer pulls out, you can therefore sue them. However, that would involve solicitors. Now imagine your house burned down in the period between exchange and completion – you could be left with nowhere to live, which does pose a risk if you've already cancelled your policy. If nothing else, you'll have a legal battle on your hands.

It might make things more complicated for you too if you have a joint buildings and contents policy, because you'd still need to insure your contents at the current address. This may mean you'd have to buy another policy for your contents in the interim period, then change it to the new address upon completion. This could then incur a mid-term adjustment fee depending on the provider. It would also mean that you'll then have a separate buildings policy for the property you're purchasing.

The safest thing to do is to keep the existing buildings and contents policy in force on your current property until completion, but to buy a separate buildings policy (and contents too, if you want to avoid any future mid-term adjustment fees for adding this cover) if you're buying a new property too.

A handy tip is to get a quote for buildings insurance and a quote for combined building and contents insurance in advance of exchange. That way, you'll be able to see that any contents element of the policy won't be unduly expensive from that provider when it's time to complete.

Do I have to get my buildings insurance from my mortgage provider?

Not at all. Some mortgage lenders do include buildings insurance as part of the mortgage package. But if they don't and they try to sell you a policy, you're under no obligation to take it. Note that your mortgage provider can reject your choice of buildings insurance if they don't feel it offers adequate cover, but you're still free to choose your own alternative. If you're using a financial advisor, they may also recommend or help find an insurance provider for you, but again you're under no obligation to buy the policy they recommend.

Have I always been able to buy my buildings insurance anywhere?

No, it used to be that you did have to buy your buildings insurance with your mortgage. But that changed after the Office of Fair Trading ruled that it was unfair, and that customers should be able to buy their insurance wherever they liked.

But despite the ruling, 1.6 million people have their buildings insurance with their mortgage provider because they thought they had to.

Not knowing your rights could cost you money. And it isn't hard to find an alternative insurance provider.

Read our guide to switching home insurance partners

I already have buildings insurance with my mortgage provider – what are my options?

Check when your policy ends and take the opportunity to compare home insurance providers and see what you could save. It's worth checking your paperwork to see what you paid and what was covered. You should now see your previous year's renewal price on any renewal letters you receive, so it's easy to know how your premium has changed. Knowing when it's due to end makes you less likely to fall into the auto-renewal trap many insurance policies have in place. It's estimated that auto-renewing policies are costing UK homeowners £230m a year due to missing out on savings, with over 25% of people falling into the auto-renewal trap.

There's nothing to stop you from switching midway through your contract, but you'll probably be charged admin and cancellation fees. Also, you won't earn your full year no-claims bonus if your insurance provider offers one. It's usually more cost effective to wait until your current policy ends.

You could save an average of £144** on your buildings and contents insurance – that's enough for several celebratory takeaways when you move in. We also found that a fortunate 10% of our customers found savings of £100*** when they compared with us.

**50% of people could achieve a quote of £142.00 per year for their buildings and contents home insurance based on Compare the Market data in February 2020.

***10% of people could achieve a quote of £100.00 per year for their buildings and contents home insurance based on Compare the Market data in February 2020.