Exchanging and home insurance on a house not yet built

p00hsticks

c_ellis92 said:

tinytiddles said:

We bought a new build 18 months ago and the solicitor’s report made it very clear that the vendor (developer) would be responsible for insuring the property 100% until completion of the sale. However when I previously bought a pre-loved home then yes I was required to get my home insurance going as “on-risk” from the date of exchange of contracts. As others have said, you’re committed to buy even if the place burns down or disappears down a hole. 

Would that still apply even if we’re waiting for another 4 months and not yet moved in? Seems ludicrous to me.

Yes, I believe so. As others have said, exchanging means that you are committed to buy, and the mortgage company will therefore almost certainly insist on you insuring it from that point, If you were cash buyers, you could probably choose not do it, if you had an appropriate attitude to risk. 

To be honest, I'm not sure how it would work in practice if the theoretical case quoted by other posters of the house burning down between exchange and completion actually happened. Yes, you would still be expected to complete, hence why you shoud lhave insurance cover, but by the same token my understanding is that the vendor also has an obligation to hand over the property in the same state as it was at the point of exchange, so they also need to keep it insured.

I also think that you may need insurance specifically for this case, as most buildings insurance would expect you to be the actual owner of the property - when we last had a gap between exchange and competion the solicitor arrange some appropriate temporary insurance for the period for us.

eddddy

p00hsticks said:

 As others have said, exchanging means that you are committed to buy, and the mortgage company will therefore almost certainly insist on you insuring it from that point,

Mortgage lenders don't generally insist that you insure from exchange of contracts - but they strongly advise it (for maybe 95% of cases).

However, if the purchase contract states that the seller is responsible for insurance, then that's usually OK instead.  The buyer's solicitor can inform the mortgage lender, if required.



Edit to add...
After exchange of contracts...

• The buyer is committed to buy
• But the mortgage lender isn't committed to lend

So if the house burns down between exchange and completion, the mortgage lender can withdraw their mortgage offer. (So it's not a problem for them, if the property isn't insured.)

Hedgepigs

Whilst it might seem unfair - in reality what are we taking about - maybe £50 - £75 as the proportion of costs of a annual policy? Annoying but not a big deal in the grand scheme of buying and selling. I'd not get too worked up about it.

 And also if you have an insurance quote from pre January you can action before it expires, you may find it is better value anyway. When I looked I was getting quoted 20 - 25% more since the rule change.

getmore4less

Builders usually require exchange quite quickly  maybe they are close to that contracts long stop date and they need their buyer committed to selling to keep them. 

keep your options open by not exchanging,   or are you at risk of them getting a new buyer if prices have moved a lot in 6 months.

tinytiddles

c_ellis92 said:

tinytiddles said:

We bought a new build 18 months ago and the solicitor’s report made it very clear that the vendor (developer) would be responsible for insuring the property 100% until completion of the sale. However when I previously bought a pre-loved home then yes I was required to get my home insurance going as “on-risk” from the date of exchange of contracts. As others have said, you’re committed to buy even if the place burns down or disappears down a hole. 

Would that still apply even if we’re waiting for another 4 months and not yet moved in? Seems ludicrous to me.

Yes because you are still committing to buy the property albeit at a date reasonably far into the future. You’re protecting yourself against the loss of the property in the event of a major fire or other incident. 

So basically if something happened post-exchange and the buyer didn’t have insurance, on completion they would be the proud owner of a building shell or a pile of dust with nowhere to live, paying a hefty mortgage repayment and trying to find the money from somewhere to pay the rebuild cost.