Buyer guide
Buildings insurance: exchange or completion? When cover must start
Ask most buyers when their buildings insurance needs to start and they will say completion, the day they get the keys. That is wrong, and the mistake can be expensive. In England and Wales the risk passes to the buyer at exchange of contracts, often several weeks before completion. From that moment the property is your responsibility, even though you cannot yet live in it. Research by the insurer LV= found that 42% of homeowners did not know this.
When cover legally needs to start
Under the Standard Conditions of Sale used in most residential purchases in England and Wales, risk passes to the buyer on exchange of contracts. Exchange is the point at which the deal becomes legally binding and neither side can walk away. Completion, when money changes hands and you collect the keys, usually follows two to eight weeks later. Between those two dates you are contractually committed to buy the property and legally responsible for it, so your buildings insurance needs to be in force from exchange, not completion.
Why so many buyers get it wrong
The assumption that cover starts when you move in is natural, because that is when the home feels like yours. But ownership of the risk and possession of the keys are two different things. Nobody in the process is clearly responsible for telling you, and it is easy to leave insurance until the last minute among everything else. That is how the LV= figure of 42% of homeowners ends up unaware, and how a gap of several weeks opens up where a buyer is committed to a property with no cover in place.
What happens if the property is damaged before completion
If the property floods, catches fire, or is seriously damaged between exchange and completion, you are still legally bound to complete the purchase at the agreed price. The seller's insurance may have lapsed or may not pay out to you, and you cannot simply walk away without losing your deposit and facing a possible claim. Without your own cover in place, you could end up paying full price for a damaged home and funding the repairs yourself. With cover from exchange, your insurer handles the damage as it would any other claim.
How to get cover in place quickly
Arrange buildings insurance before you exchange, not on the day. Get quotes as soon as your survey is back and the purchase looks firm, because some policies take a few days to set up and you do not want to be scrambling on exchange day. Ask your solicitor for the likely exchange date and set the policy to start from it. If exchange and completion are close together, a standard policy is straightforward. If there is a longer gap, ask the insurer to confirm the property is covered while it may be unoccupied.
What to check in the policy
Make sure the rebuild cost, not the market value, is high enough to rebuild the property from scratch, since that is what buildings insurance covers. Check that the policy covers the home while it is unoccupied between exchange and completion, because some standard policies exclude or limit cover for empty properties or require you to notify them. Confirm the start date matches your exchange date. If the property is leasehold, check whether the freeholder already insures the building, in which case you may only need contents cover.
Short-term cover to bridge the gap
If you need cover only for the window between exchange and completion, short-term exchange of contracts policies exist for exactly this purpose. They are worth asking about when the gap is long or the property will sit empty. In most cases, though, the simplest approach is to take out your ordinary buildings policy with a start date set to your exchange date, so cover runs continuously from the moment the risk becomes yours.
Common questions
Do I need buildings insurance before completion?
Yes. In England and Wales the risk passes to the buyer at exchange of contracts, so your buildings insurance should start at exchange, not completion. Most mortgage lenders also require cover to be in place from exchange.
When does buildings insurance start when buying a house?
It should start on the day you exchange contracts. That is when you become legally responsible for the property, even though completion and getting the keys usually happen a few weeks later.
What if the house is damaged between exchange and completion?
You are still legally required to complete the purchase at the agreed price. If you have buildings insurance from exchange, your insurer covers the damage. Without it, you could face paying full price for a damaged home and funding the repairs yourself.
Does this apply in Scotland?
No. Scotland has a different system based on missives, and the point at which risk passes can differ. This guidance covers England and Wales. Check the position with your solicitor if you are buying in Scotland.
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