Mortgages & Home Finance A Guide To Buildings Insurance

Date Published:

07/07/2009

If your home was destroyed by fire or flood, would you be able to afford to rebuild it? If the answer is no, then you need buildings insurance.

By Sarah Jagger

What Is Buildings Insurance?

Buildings insurance covers the cost of rebuilding your home in case of fire, subsidence, flood or storm or other disasters such as burst water pipes or falling trees. Plus it covers permanent fixtures such as baths, toilets, fitted kitchens and central heating boilers.

Most policies also cover garages, greenhouses or sheds but the Association of British Insurers (ABI) warns that, depending on your policy, boundary walls, fences, gates, paths, drives, tennis courts and swimming pools may not be covered.

Your cover should also include the cost of having the site cleared of debris – if your house is burned down, for example – and surveyors’ and architects’ fees. You should also make sure that you are covered for the cost of alternative accommodation whilst the work is carried out.

Is Buildings Insurance Essential?

Your mortgage lender will require that you take out this type of insurance. But it makes sense even if you don’t have a mortgage. Buildings insurance does not cover damage to your possessions – for this you need contents insurance.

How Much Cover Do I Need?

The amount of buildings insurance you need works out less than the market value of your property – this may seem bizarre but is partly because the cost of the land is included in the market value. This can therefore make it tricky to assess cover levels. The rebuild cost of your home can be found on your mortgage agreement but factors including rising property values over recent years have meant that rebuilding costs may be higher than when you bought your home. So you should regularly review your cover to ensure you’re not uninsured. Use the home insurance rebuilding calculator on the ABI’s website.

Do Insurers Do Anything To Help?

Insurers index-link the ‘sum insured’ (or the maximum a buildings insurance policy will pay out), to deal with rising or falling rebuilding costs. The sum insured moves in line with the index during the year but does not affect how much you pay in premiums until the renewal date when your premium is recalculated.

So if you make any home improvements such as an extension or installing double glazing before your policy comes up for renewal you should contact your buildings insurer so they can update your policy.

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