Insurance needed from Exchange or Completion?

macgirl

Hiya

We are due to complete on Friday (though haven't exchanged yet :cool:). I have been looking for quotes for insurance for the new house, but had not booked it, then the solicitor rang today chasing the policy number in order to draw funds from the bank.

I've just arranged it now to begin on Friday - completion day, but someone has just said we need to insure the property from Exchange...

Can anyone let me know if this is correct please?
Thanks

pinkteapot

You need Buildings insurance from exchange. Contents can be added on completion. However, if exchange and completion are that close together you might as well just do the whole policy from exchange as you're not going to save that much on a few days contents cover.

The reason you need Buildings from exchange is that if the house were to burn down between exchange and completion, you're still legally bound to buy it!

macgirl

Thanks very much. I'll find out when we exchange and amend it.

sonastin

Seems like its a bit of a grey area as to who is responsible for insurance during the time between exchange and completion - you are bound to buy it but they are bound to hand it over in the condition it was in at exchange.

My view is why take the risk? Unless you have a really long time between exchange and completion (which is certainly not the case here) why quibble over £10s of pounds when it could end up costing £1000s (more like £100000s) to sort out if it goes wrong. I'd prefer us both to be insured and the insurance companies fight over who has to pay, than find that neither of us had the property insured and we end up in a legal battle over whether or not I'm still obliged to pay for the property.

sinbad182

What happens if you buy a flat? The place Im about to exchange on has a service charge on it, which apparently includes building insurance. Do I still need to buy my own policy?

macgirl

sonastin wrote: »

Seems like its a bit of a grey area as to who is responsible for insurance during the time between exchange and completion - you are bound to buy it but they are bound to hand it over in the condition it was in at exchange.

My view is why take the risk? Unless you have a really long time between exchange and completion (which is certainly not the case here) why quibble over £10s of pounds when it could end up costing £1000s (more like £100000s) to sort out if it goes wrong. I'd prefer us both to be insured and the insurance companies fight over who has to pay, than find that neither of us had the property insured and we end up in a legal battle over whether or not I'm still obliged to pay for the property.

Yes, my sentiments entirely, no point quibbling over a few quid. Just didn't think there could be 2 policies on one property and assumed we had to insure it from when it's legally ours - completion. Will find out the day of exchange in the morning and amend it. You live and learn.

Thanks all!

G_M

sinbad182 wrote: »

What happens if you buy a flat? The place Im about to exchange on has a service charge on it, which apparently includes building insurance. Do I still need to buy my own policy?

If the service charge includes building insurance you shouldn't need to buy your own. But when your solicitor checks the service charge payments are up to date he should also check the management company has indeed put building cover in place.

You may want to consider contents insurance (and life insurance) (and critical illness insurance) (and redundacy insurance) (and pet.....)

Paul_the_Painter

In theory you can't have 2 insurance policies for the same house, in practice it happens a lot. There is a set of criteria insurance companies apply if a claim happens, along the lines of "company A pays half and company B pays half" There may also be a reduction of premium to take into account that you were insured twice, but that doesn't always happen.

For a few months this year my house was insured by 3 companies - complex story, but resolved in the end!

timmyt

pinkteapot wrote: »

You need Buildings insurance from exchange. Contents can be added on completion. However, if exchange and completion are that close together you might as well just do the whole policy from exchange as you're not going to save that much on a few days contents cover.

The reason you need Buildings from exchange is that if the house were to burn down between exchange and completion, you're still legally bound to buy it!

that is wrong advce.

Your duty to insure derives from the contract, Standrad Condition 5 (4th ed). If the seller is passing 'risk' to you, then you should insure, as any damage to the property post exchnage then falls to you, and you still have to complete.

However, if I act for a buyer, I will always look to remove the risk passing, ONLY if the Seller has no related purchase themselves. The seller will always agree, as there is no good reason why when selling alone, your buyer should take the risk on exchnage.

The only time a buyer needs to take risk is when a seller needs to buy, as they cannot allow their own buyer to back out of the contract if the house they are selling gets damaged in between exchnage and completion, as they would be bound to still complete on their own purchase yet not have their buyer on board to fund it.

Many many conveyancers misunderstand this, and allow their client to take the risk.

Having said that, most lenders will require the borrower to insure from exchnage.

Richard_Webster

However, if I act for a buyer, I will always look to remove the risk passing, ONLY if the Seller has no related purchase themselves. The seller will always agree, as there is no good reason why when selling alone, your buyer should take the risk on exchnage.

The only time a buyer needs to take risk is when a seller needs to buy, as they cannot allow their own buyer to back out of the contract if the house they are selling gets damaged in between exchnage and completion, as they would be bound to still complete on their own purchase yet not have their buyer on board to fund it.

Many many conveyancers misunderstand this, and allow their client to take the risk.

Having said that, most lenders will require the borrower to insure from exchnage.

This is sensible advice. Personally I don't bother removing risk when acting for a buyer form someone not selling as I always advise buyers to insure from exchange - but that is a detail. TimmyT is taking the reasonable view that if his buyer client forgets to insure from exchange then if the Standard Conditions remain unamended then his buyer client has a let out if the place burns down!

macgirl

Thank you Timmy and Richard.

Well, our buyer isn't buying and has already moved into rented. We have nothing to sell.
I dropped in my insurance docs to the solicitor this morning and he was in reception so got it straight from the horses mouth so to speak. He said not to worry as we will most probably exchange and complete simultaneously, but thanks once again for your input