Building Insurance – Definition, Overview & FAQ
What is a building insurance?
Definition: Building insurance is a property insurance type that covers the cost of repairing or rebuilding a property in case of damage from certain events.
Key aspects of building insurance include:
- Coverage: It typically covers damage from fire, flood, storms, earthquakes, theft, and sometimes accidental damage. The extent of coverage can vary between policies.
- Structural Protection: The insurance focuses on the structure of the building itself, including walls, roofs, floors, and often permanent fixtures like kitchens and bathrooms.
- Legal Requirement for Mortgages: In the UK, building insurance is usually a requirement by mortgage lenders to protect the property, which serves as collateral for the mortgage.
- Additional Coverages: Policies may offer additional coverages like alternative accommodation costs if the property becomes uninhabitable due to covered damage.
- Exclusions: Certain events or circumstances may be excluded from coverage, so it’s important to understand the policy details.
- Premium Factors: The cost of the insurance premium depends on factors like the property’s value, location, construction materials, and the level of coverage.
Building insurance is crucial for homeowners to protect their investments and ensure financial security against potential property damage.
What does building insurance cover?
Building insurance in the UK typically covers the following:
- Structural Damage: Protection against damage to the structure of the building, including walls, roofs, and floors.
- Permanent Fixtures: Covers fitted kitchens, bathrooms, and built-in wardrobes.
- External Structures: Includes garages, fences, and garden sheds.
- Pipes and Cables: Covers accidental damage to pipes, cables, and drains.
- Glass and Sanitary Ware: Includes windows, glass doors, and fixed sanitary ware like toilets and bathtubs.
- Natural Disasters: Protection against damage from events like storms, floods, earthquakes, and subsidence.
- Fire and Smoke Damage: Covers repairs or rebuilding costs due to fire.
- Theft and Vandalism: Protection against damage from break-ins or malicious damages.
- Accidental Damage: Some policies offer cover for accidental damage, but this might be an optional extra.
It’s important to review the policy’s terms for specific coverages and exclusions, as these can vary among insurers.
Building insurance doesn’t cover:
- General Wear and Tear: Damage due to age or normal use is not covered.
- Mechanical Breakdown: Problems with internal systems due to malfunction or wear, like boiler issues.
- Deliberate Damage: Damage caused intentionally by the homeowner.
- Acts of War or Terrorism: Most policies exclude damage from war, terrorism, or related activities.
- Unoccupied Properties: Damage to properties left unoccupied for extended periods (usually over 30 days) without prior arrangement.
- Certain Natural Events: Some policies exclude specific natural events like flooding in high-risk areas.
- Damage from Illegal Activities: Damage caused as a result of criminal or illegal activities.
- Cosmetic Damage: Issues that don’t affect the property’s structural integrity or use.
- Pest Infestations: Damage caused by pests like rodents or insects.
Types of building insurances
In the UK, there are several types of building insurance, each catering to different property types and owner needs:
- Standard Building Insurance: Covers the cost of repairing or rebuilding a home due to damage from events like fire, flood, and theft. This is the most common type for homeowners.
- Landlord Insurance: Specifically designed for property owners who rent out their buildings. It covers standard risks and can include landlord-specific issues like loss of rent and liability protection.
- Commercial Building Insurance: For properties used for business purposes. This covers the building and often includes public liability insurance and cover for business interruption.
- Listed Building Insurance: For properties that are listed due to their historical or architectural significance. These policies account for the potentially higher cost of repairs and special materials needed.
- Flat Insurance: Tailored for flats or apartments, addressing the unique risks associated with shared buildings.
- Unoccupied Building Insurance: For properties that are left vacant for extended periods, offering protection against risks like vandalism or weather damage when the property is unoccupied.
- Self-Build Insurance: For individuals constructing their own homes. This covers the building during construction and often includes public liability cover.
- Blocks of Flats Insurance: Designed for owners or managers of multiple-flat buildings, covering the entire structure and common areas.
Each type of insurance varies in coverage specifics, so it’s important for property owners to choose the one that best suits their situation and risk exposure.
When do you need building insurance?
You need building insurance under the following circumstances:
- Mortgage Requirement: If you have a mortgage, lenders usually require building insurance as a condition of the loan to protect their investment.
- Upon Exchange of Contracts: In home purchases, the responsibility for insuring the property usually shifts to the buyer upon exchange of contracts, not completion.
- Landlord Responsibilities: If you are renting out a property, it’s prudent to have building insurance to cover potential damages and protect your investment.
- Self-Build Projects: Insurance is needed to cover the construction phase if you are building a property.
- Own a Freehold Property: As a freeholder, you are responsible for insuring the building, especially important since you own both the property and the land.
- Management of Flats or Apartments: For those who own flats, building insurance is essential for the entire building, covering common areas and the structure.
- Unoccupied Properties: If a property is going to be unoccupied for an extended period, special building insurance is necessary to cover the increased risks.
What does building insurance typically cover?
Standard policies usually cover damage from fire, storms, floods, earthquakes, theft, and vandalism. Coverage for accidental damage and legal liability may also be available.
Are there any exclusions to building insurance?
Yes, common exclusions include general wear and tear, damage from poor maintenance, and certain natural disasters. Policies vary, so it’s important to read the terms and conditions carefully.
How is the cost of building insurance determined?
Insurers consider factors like the building’s location, age, construction materials, the rebuild value, and the owner’s claims history to determine the premium.
What is the difference between building and contents insurance?
Building insurance covers the structure of your home and its fixtures, while contents insurance covers your personal belongings inside the home.
Can I get building insurance if I rent out my property?
Yes, landlords should obtain landlord building insurance to cover their rental properties. It’s specifically designed for rental situations.
Is building insurance mandatory?
While not legally mandatory, most mortgage lenders require you to have building insurance as a condition of the loan.
How can I reduce the cost of my building insurance?
You can reduce costs by maintaining your property well, installing security measures, increasing your excess, and shopping around for competitive quotes.
Can I switch building insurance providers?
Yes, you can switch providers, but it’s advisable to compare policies thoroughly and ensure there’s no lapse in coverage during the switch.