How much buildings insurance do I need?

Owning a home is probably the biggest financial decision you will ever make. Having a good home insurance policy in place, therefore, can act as a safety net should the unexpected happen.

But taking out too much cover means you risk overpaying on your policy. Take out too little and you might be excluded from certain features that you need.

What is buildings insurance?

Buildings insurance exists to cover the cost of repairing damage to the structure of your property – the bricks and mortar, pipes, cables and drains. Permanent fixtures including fitted kitchens and bathrooms, as well as outbuildings such as conservatories, garages and sheds, are usually also covered under buildings insurance.

Your home buildings insurance should cover the full cost of having to rebuild your home. Rebuilding your home includes the costs of demolishing the remaining structure, clearing the plot, and any planner or architect fees incurred during the rebuild process.

What does buildings insurance cover against?

Generally speaking, buildings insurance will usually cover the loss or damage caused by the following: -

• Fire damage (home fires, smoke, explosions).
• Flood damage
• Storm damage
• Theft and attempted theft
• Malicious damage (e.g., vandalism).
• Escape pf water (e.g., from a leaking or burst pipe or appliance)
• Subsidence, leave, or landslip
• Fallen trees
• Impact by aircraft, or other aerial devices.

Am I legally required to have buildings insurance?

Unlike motor insurance - which is a legal requirement to drive on roads in the UK - buildings insurance is not mandatory. But if you don’t have it, you'll be responsible for covering the full cost of repairs should the worst happen.

What kinds of things should I consider when taking out buildings insurance?

When selecting a buildings insurance policy, there are some important features you need to consider:

Buildings Sum Insured: The total cost of rebuilding your property from scratch. It should include the cost to clear the site, as well as any other fees, such as those from builders or an architect.

Index-linked sum insured: This means the cost of rebuilding your home rises with inflation. This means you will not be left underinsured should the worst happen to your property.

Alternative accommodation: covers the cost of staying somewhere else while your home is being repaired. This is usually somewhere such as a rented property or hotel.

Public liability: covers you against compensation claims and their legal costs if you are deemed responsible to having caused injury (including death) to a third party or their property while on your premises.

I am getting a mortgage. Will I need buildings insurance?

Yes. Buildings insurance will be a condition of any mortgage you want to get. This is because once you take out a mortgage, the security will be your property. Your mortgage lender has a vested interest in the value of the property and anything that could negatively affect it. For example, if a fire destroyed your home and you did not have buildings insurance, the lender would be unable to recover the amount they lent you.

Remember: you must have appropriate buildings insurance in place from the date of contracts being exchanged.

Also, if your property at any point is repossessed, you are responsible for insuring the property until it is sold. You must inform your insurer you are not living in the home during this time, otherwise your risk your cover being invalidated.

Will my mortgage lender choose my buildings insurer for me?

Your lender may recommend an insurer, but in most cases, you are free to choose one yourself. However, there may be cases where you will have to use the lender’s buildings insurance policy if it is included with the mortgage deal you take out.

What is the difference between a freehold and leasehold property?

With a freehold, you own the property and the land it is built on for as long as you own it. A leasehold is where you own the property for a certain amount of time, but never the land it is built on.

Do I need different buildings insurance depending if my property is leasehold or freehold?

If you are taking out a buy-to-let mortgage on a flat or home, you will likely be purchasing a leasehold property. The property will still require buildings insurance, but you may not need to arrange this. With leasehold properties, the responsibility usually lies with the landlord (sometimes known as the ‘freeholder’) who owns the building and will be responsible for arranging insurance for the whole development. Leaseholders will be required to contribute towards this as part of their service charge.

However, this is not always the case, such as if you own the freehold for your flat, or a share of the freehold, so it is important to ask your solicitor during the conveyancing process of your mortgage.

How can I calculate what it would cost to rebuild my home?

When selecting buildings insurance, you can choose a policy that covers the cost of rebuilding your home (sum insured), or the current value if you were to sell. The first is the most common, and often cheaper. However, depending on your property and where you live, it may be worth researching which option is right for you in order to avoid over or under-insuring your home.

Some insurers will offer buildings insurance with unlimited cover, so you won’t need to work out the rebuild costs. However, if you already know these figures, it may be cheaper to find a policy that fits your exact needs.

Although most insurers will calculate the rebuild costs of your home, it's good practice to confirm the buildings sum insured amount. You can do this by using an accredited home rebuild calculator.

If your home's a listed building or not of standard construction, it's recommended to have a surveyor make an assessment. If the surveyor deems your home to be in either of these categories, you’ll likely need specialist buildings insurance.

Although they won’t fluctuate as often as your property’s market value, rebuild costs will change over time.  So it's a good idea to regularly review your policy to make sure you aren’t under-insuring your home.

Additionally, if you make improvements or renovations to your home – such as carrying out a loft conversion or adding an extension – rebuild costs will increase, so make sure you are adequately covered.

Frequently Asked Questions

I have a pool/hot tub. Will this be covered under standard buildings insurance?

If you have a swimming pool or hot tub that is a permanent fixture fitted into the ground within the boundary of your property, it will be considered as part of the structure of your house and as such, covered by your buildings insurance.

Although these structures will be protected for loss or damage as a result of things such as a storms or floods, if they are damaged accidentally, you may need additional cover.

What does buildings sum insured mean?

Buildings sum insured is the maximum amount that your insurer will pay out to rebuild your home from scratch. It is neither the current value of your home, nor the price you paid for it.

Your policy will list the sum insured amount. It’s important to check that this amount is correct and enough to cover the full cost of rebuilding your property.