Do You Need Buildings Insurance?

Why you need buildings insurance.

Like most financial matters, the answer to whether you need buildings insurance is probably it depends.

The answers are:

NO – if you rent a property – the landlord takes responsibility for insuring the building.

NO – if you own a flat because generally the freeholder or management organisation looks after insuring the whole block and includes an amount for buildings insurance in your service charge.

YES – if you own your own home, even if the property doesn’t have a mortgage.

What does buildings insurance do?

Buildings insurance covers repairing and rebuilding in the event of damage from fire, storms, flooding, subsidence and a host of other risks, like vehicles leaving the road and colliding with your home or parts falling from aircraft damaging the roof.

Special cover you should ask your insurer about is for:

Flooding

Covering your property against flooding is difficult after heavy floods in recent years.

Insurance companies are concerned that climate change is likely to cause more serious flooding in the future and hike up policy costs by up to 65% if your property is in a high flood risk area.

A clever new technology calculates the flood risk for every home in the UK for insurers by taking detailed flood plain maps from the environment agency and overlaying the data on ordnance survey maps.

This means if you live in a street on a hill, the flood risk for the top of the hill is less than that for homes at the bottom, so the insurance companies adjust the insurance premiums accordingly.

Subsidence

Subsidence is often a big as problem as flooding, especially around London and the southeast, where many properties are built on clay. When the clay dries out, the house foundations move and cracks can appear in walls.

The solution is often to underpin the property by adding new foundations.

Alternative accommodation cover

If you have to move out for long-term repairs on your home, you need to know your policy covers the costs of renting another home

Why you need buildings insurance

If your home is damaged and needs expensive repairs, buildings insurance should cover the costs for you.

Mortgage companies often stipulate buying adequate buildings insurance as a condition of the loan to protect the value of their asset.

Even if a homeowner does not have a mortgage, they should still have adequate buildings insurance cover for the same reasons.

The worst that can happen is your home is destroyed and needs rebuilding and because you have no insurance, you can’t afford to do so, leaving you homeless and the owner of a property worth virtually nothing compared to the market value.

How much cover is required?

The rebuilding cost is often worked out by a surveyor and then index linked by the insurance company. As a rule-of-thumb, the land the property stands on is roughly a third of the market value of your home, so the rebuilding cost accounts for the other two thirds.