Buying a property and when to insure

One question we are often asked is when should I be looking to insure the property that I am buying?

The answer is usually dependent on whether or not the property that you are looking to buy is leasehold or freehold.

The vast majority of leasehold properties (although not all) are insured by the freeholder or management company, depending on the terms of the lease. Often the insurance, especially for larger blocks or a large portfolio of properties is under a block policy. In these circumstances, you would usually pay for the cost of the buildings insurance through the service charge. As the property remains insured under the freeholder’s or management company’s policy it is not usually necessary to take out buildings insurance as the property will be insured throughout the period that you are buying and will remain so after completion. Contents insurance (for the items within a leasehold property) is optional and you may wish to consider it depending on your circumstances.

For freehold properties the situation is a little different. It is usually for the owner to take out buildings insurance to cover the usual risks to a property such as fire, subsidence and the like. Most mortgage lenders will require that you have adequate buildings insurance in place and some require to see it before they will release the mortgage advance.

Under the standard terms of sale governing the purchase contract, the risk of insurance passes to the buyer on exchange of contracts. Note that this is usually before completion. It is therefore sensible to have quotes for insurance lined up before exchange so that you can place the policy on risk at exchange.

Likewise, as with leasehold properties, contents insurance is optional but advisable and is often tied in with the buildings insurance policy.