How essential is Buildings insurance on exchange?

Lemoncurd

We got the date to exchange on our property purchase last week and as soon as we knew it we 'bought' buildings insurance online with the policy set to start on 1st July. As no payment had been taken from my card and we hadn't recieved any paperwork I called them today and after many phone calls were told several times that they have no record of our policy number. Basically it seems we aren't covered yet, so what are the implications? I noticed on the contracts that it said that the vendor must insure the property up until completion, so why does the buyer also have to insure it from exchange, is it just to cover our backs if something goes wrong with the vendors insurance?



The full story because I feel like a rant:
After doing a bit of research a few weeks ago we decided to go with our current contents insurer for the buildings cover at the new property as they had one of the best prices and a good level of cover. I went through their online quote system several times but it wouldn't let me save my quotes because they had a record on there with me as an existing customer. Last Wednesday I phoned them up with a few extra questions thinking I would buy over the phone but the quote over the phone was £100 more so she suggested I went back online. Tried that but it wouldn't let me buy for the same reason as before - the system required me to enter a password which I didn't have so I phoned the number it told you to if you didn't know your password. The person I spoke to said they couldn't help and gave me a different number, the next person said there was no record for my details and offered to let me buy over the phone, I explained the price difference and she tried again incase there had been a mistake - still a big price difference so we decided to do it online in my husbands name (it would be a joint policy anyway).
Went through and bought the policy in my husbands name with no problems, we entered additional details to buy it and entered my credit card details and then a confirmation screen was displayed saying "Your Policy has been bought.
Your Policy will start on 1 July 2005 and is effective for 12 months. You have elected to pay the premium by Credit Card." and giving the policy number. I just copied and pasted it from the screen so don't really have a proper record.

They now just keep on saying they have no record (although we can go into it online ourselves but it keeps on timing out) and haven't been able to set the policy up today. They are being so unhelpful and just keep on giving us different numbers to call and each person says they can't help.
There are several reasons why we want to buy a policy through them despite this and I've been with them since 1999 and they've been great in the past.

mrcow

In a sentence....it's imperative. You really need to get this sorted out ASAP.

Lemoncurd

Basically what we thought, we've been so stressed about this today, it's been like we're banging our heads against a brick wall. They confirmed we had insurance last week and now they are saying we haven't!!! We just took out another policy a few mins ago and will be following that up tomorrow to make sure it really is in place!
Assuming the first policy doesn't suddenly turn out to be ok are there going to be any implications when the solicitor/mortgage lender sees that the new policy is dated several days after exchange?

mrcow

To be honest, there's so much going on during a move, I can't remember ever being asked for proof of insurance by a lender or solicitor before. That's not to say that they definitely don't ask for it.

I'm sure that some kind person will correct me if I'm wrong......

As long as your insurance company can confirm that you're covered now, I don't really see what else you can do, and I wouldn't start worrying yourselves about it. I suppose if they want proof that you were covered from 1st July, you could always quote the original policy number that you had on your screen dump as a temporary reference number?

terrierlady

usually the solicitor asks for a copy of the insurance document and will not exchange until it is produced, i know on our developments it often holds up exchange of contract, with new homes the developer/builder also usually insures until completion day.

RiskAdverse100

When buying a freehold house, your first port of call is the contract. This will clearly say if the buyer is supposed to insure on exchange or not.

For a leasehold flat the lease deals with insurance. Unless you have a property divided into a very small number of flats, the landlord is in nearly all cases responsbile for making sure that there is a buildings insurance policy in place at all times covering the whole of the building.

You do sometimes come across buildings with only two flats where each flat owner insurers their 'half' of the building. This can cause problems.

Contracts are covered by what are known as the Standard Conditions of Sale. The current edition is the Fourth Edition. Most of what the Standard Conditions say is only of interest to the solicitors acting.

The default position for buildings insurance is set out in SC 5. The seller is to transfer the property to the Buyer on the completion date 'in the same physical state as it was at the date of the contract (ie the date of exchange) ..... which means that the seller retains the risk until completion'. However SC 5 also says that 'The Seller is under no obligation to the Buyer to insure the property'.

Confusing eh?

If SC 5 is amended by a specific condition in the sale contract it usually passes the insurance obligation on to the buyer.

But if the seller has a mortgage then his will be required by this to ensure that the property is insured at all times!

My advice to buyers of freehold houses is always to have buildings insurance cover in place as from the date of exchange regardless of what the contract says and regardless of whether or not the seller has a mortgage.

If the buyer is taking out a mortgage then one of the conditions of this may say that buildings insurance cover has to be in place from the date of exchange.

Lenders nowadays are happy for borrowers to arrange their own insurance but they often require the solicitor acting to obtain details of the insurance so that they can confirm when requesting the mortgage monies a week or so before completion that what has been arranged is satisfactory.

Solicitors would not normally want to see evidence of cover before exchange takes place.

What lenders require buildings insurance policies to cover is set out in Part I of the Council of Mortgage Lenders Lenders' Handbook. The Handbook contains standard instructions that solicitors acting for lenders must comply with. The Handbook is available online at:

https://www.cml.org.uk/servlet/dycon/zt-cml/cml/live/en/cml/ms_handbook_england

Buildings insurance is covered in paragraph 6.

I cannot imagine that there will be implications of not being able to show that you did have insurance in place as from the date of exchange as far as your lenders and your solicitors are concerned. However, if the house burns down before you have cover and you are obliged under the terms of your mortgage or the contract to insure from exchange, then the obvious implication is that you will have to buy on completion a piece of land with the charred remains of a house on it, your lenders will refuse to advance the mortgage monies and there will be no insurance policy to claim on!

RiskAdverse100

Lemoncurd

My husband followed up the second policy this morning and the customer service person could not confirm whether or not it was ok. He said it could take up to 48 hours to get on their system, we don't feel we have that long as we are due to complete next Friday and need to give our solicitor the schedule to arrange the mortgage. Again we have confirmation from the website that we have bought a policy and a policy number but this isn't really enough.

Anyone know if when you get insurance from an insurer on the High Street e.g. a bank or a building society if any of them print off an insurance schedule straight away?

dragonsoup

Do you have an insurance broker in your area? They should be able to arrange cover for you immediately and get the necessary proof sent to your lender asap. If you have the survey report take it in with you.

virgin_moneysaver

we are moving next week & we were advised of the need for insurance - rang Direct Line, they gave us 13 months cover for the price of 12 months from last Friday when I rang to cover us in case our estimated completion date changed, they then faxed me the necessary details immediately which I then took to the solicitor that afternoon & the policy documents arrived 1st class on the Monday - not a problem

sjmburrows

I always thought that a fundamental principle of English law is that you can't insure somebody else's property, so how can you insure a house between exchange and completion?

The previous replies are helpful, but still seem ambiguous to me and I don't want to spend £600 unnecessarily insuring my newly exchanged property if it's not essential. I know that the seller has a mortgage and he told me he has property insurance, so what is my exposure in not taking out my own cover?

Thanks
Simon

johnson293

We exchanged yesterday, but at no point did the solicitor tell me I needed Insurance, or has asked for any proof.

I had read that I needed it from Exchange, so arranged to cover from midnight yesterday, so that the policy was in place as/when we exchanged.

EDIT: Just re-read the thread and see it was originally posted back in 2005!!

To answer the post above, I believe the reason you need to insure the property under a buildings policy once you exchange, is becasue at that point you are legally bound to buy the property, the seller is legally bound to sell you it, and the lender is happy to give you the money for it and all that remains is the formality of processing monies from mortgages.

The worst case scenario is that you exchnage contracts, and before completion, something happens to the property - fire, flood or suchlike, and the mortgage company could still be committed to paying out that mortgage money on a now damaged property.

Our Insurance quote for our new house was roughly £220 with AIG for buildings and contents insurance. We complete on Monday, so I didn't mind paying for contents for 3 days as well as buildings cover, even though we dont move in till Monday.