Building insurance mandatory?

Troy_af

Good evening.

So, my home buildings insurance on my current home is going to run out probably before I move into my new home. There will probably be a gap of 2 month or so between it expiring and completion on my new place.  

My question is, do I still need to take out a new policy for my existing home? Im not sure if this is a legal requirement from your lender as it is when buying a new property?

Thanks for any advice.

Alter_ego

How would you feel if the place burned down?

molerat

It will be a contractual requirement between you and the lender, they want their mortgaged amount protected.

user1977

Troy_af said:

Im not sure if this is a legal requirement from your lender as it is when buying a new property?

Not sure what you’re getting at? It’s a requirement of your mortgage lender throughout the duration of your mortgage. So if your old house is still mortgaged, yes of course you need to renew the insurance.

Why are you considering not renewing it? You do realise you cancel it after completion of the sale and get a pro rata refund of the premium (minus an admin fee)?

TELLIT01

You should renew the insurance and then transfer it to the new property on the date contracts are exchanged.  After that date, responsibility for insuring the current property falls to the new owners and you need to provide insurance for the new property.  At least that is my understanding of how it works.

user1977

TELLIT01 said:

You should renew the insurance and then transfer it to the new property on the date contracts are exchanged.  After that date, responsibility for insuring the current property falls to the new owners and you need to provide insurance for the new property.  At least that is my understanding of how it works.

No, you need to maintain cover for the property you're selling until completion happens. While it might in theory be the buyer's risk if an insured event happens between exchange and completion, that only helps you if completion actually happens - and I suspect there's a high risk of it not happening if eg the house has burned down. 

GrumpyDil

user1977 said:

TELLIT01 said:

You should renew the insurance and then transfer it to the new property on the date contracts are exchanged.  After that date, responsibility for insuring the current property falls to the new owners and you need to provide insurance for the new property.  At least that is my understanding of how it works.

No, you need to maintain cover for the property you're selling until completion happens. While it might in theory be the buyer's risk if an insured event happens between exchange and completion, that only helps you if completion actually happens - and I suspect there's a high risk of it not happening if eg the house has burned down. 

Once exchanged the purchaser is obliged to complete. That said I would maintain cover anyway as the risk of complications for the sake of a couple of hundred quid is not worth taking. 

user1977

GrumpyDil said:

user1977 said:

TELLIT01 said:

You should renew the insurance and then transfer it to the new property on the date contracts are exchanged.  After that date, responsibility for insuring the current property falls to the new owners and you need to provide insurance for the new property.  At least that is my understanding of how it works.

No, you need to maintain cover for the property you're selling until completion happens. While it might in theory be the buyer's risk if an insured event happens between exchange and completion, that only helps you if completion actually happens - and I suspect there's a high risk of it not happening if eg the house has burned down. 

Once exchanged the purchaser is obliged to complete. 

Uhuh. But what happens if they don’t? You’d be safer recovering the money from your insurance company than from a buyer who may be of no substance (and/or disappear).

Smithcom

GrumpyDil said:

user1977 said:

TELLIT01 said:

You should renew the insurance and then transfer it to the new property on the date contracts are exchanged.  After that date, responsibility for insuring the current property falls to the new owners and you need to provide insurance for the new property.  At least that is my understanding of how it works.

No, you need to maintain cover for the property you're selling until completion happens. While it might in theory be the buyer's risk if an insured event happens between exchange and completion, that only helps you if completion actually happens - and I suspect there's a high risk of it not happening if eg the house has burned down. 

Once exchanged the purchaser is obliged to complete. That said I would maintain cover anyway as the risk of complications for the sake of a couple of hundred quid is not worth taking. 

Would the buyer complete, do you you think, if the house had burnt down?     

Also, do you think that any mortgage lender would release funds to complete, if the house had burnt down?

I appreciate that your advice is for the OP to maintain cover, however, between exchange and completion, both buyer and seller should have appropriate insurance to protect their own distinct interest. 

SC

Rodders53

Most decent house insurance policies will cover both properties (if required) between exchange and completion... and transfer cover from old to new property {albeit with a premium recalculation}.

Insurance Co.s would battle it out / agree who pays in the (likely) event there is double cover from seller and purchaser during exhange-completion process and the (relatively unlikely) event of a claim needed.

Only the very foolish would not insure the most valuable asset any of us (part) own.

GrumpyDil

user1977 said:

GrumpyDil said:

user1977 said:

TELLIT01 said:

You should renew the insurance and then transfer it to the new property on the date contracts are exchanged.  After that date, responsibility for insuring the current property falls to the new owners and you need to provide insurance for the new property.  At least that is my understanding of how it works.

No, you need to maintain cover for the property you're selling until completion happens. While it might in theory be the buyer's risk if an insured event happens between exchange and completion, that only helps you if completion actually happens - and I suspect there's a high risk of it not happening if eg the house has burned down. 

Once exchanged the purchaser is obliged to complete. 

Uhuh. But what happens if they don’t? You’d be safer recovering the money from your insurance company than from a buyer who may be of no substance (and/or disappear).

I don't disagree but in legal terms the purchaser is obliged to complete and the risk transfers to the purchaser at exchange.

Although in practice, if for example the house burnt down due to the seller's negligence, the purchaser would have a claim against the seller.

So my view would be to keep insurance in place and as Rodders53 says, in the unlikely event of a claim being made, leave the insurance companies to fight it out.