Why it pays to take sound advice over buildings insurance - Gareth Shaw

I’m buying a house, having previously owned a flat where my buildings insurance was arranged by my freeholder. I looked at a few price comparison sites but I really don’t know where to start. How, for example, do I know what the rebuild cost of my property is? What optional extras do I buy? Thanks in advance.

Name supplied, via email

Gareth says…

Of the portfolio of insurance policies we tend to accumulate throughout our lives – car, pet, travel gadget - buildings insurance is not one you want to skimp on. Essentially, it covers the cost of fixing any damage caused to your property by a whole host of issues, from fire, explosions and smoke, through to storms, natural disasters or a tree collapsing on your property.

Typical policies will cover the walls, roof windows and any permanent fixtures, like kitchens or bathrooms. It can also include garages and outhouses, although that sometimes depends on the policy. It is designed to work alongside contents insurance, which protects the individual items within your home.

It is very common for people in your stage of a property chain – transitioning from a leasehold flat to a freehold property - to encounter buildings insurance for the first time. This is often because mortgage lenders make it a requirement to have buildings insurance in place from exchange of contracts through to beyond completion, to cover the very rare occurrence that something catastrophic happens to the property during that time.

Let’s address your first question – the rebuild cost. Some buildings insurance will pay out to rebuild your property from scratch. This is sometimes referred to as ‘sum insured’ cover, and should also include things like demolition costs and professional fees. It won’t be the same as the market value for your home, and can be quite complicated to work out.

However, you should have a degree of confidence using price comparison sites. They provide a range of cover amounts for rebuild costs based upon an industry standard calculator. The Building Cost Information Service (BCIS), part of the Royal Institution of Chartered Surveyors (RICS), offers a calculator to help you estimate the costs of your rebuild. Comparison sites will utilise that functionality to provide you with an estimate.

The advantage of this is that with a rough estimate of the rebuild costs, you can then set the amount of cover you have to align with the peace of mind you think you need. When I bought my home, I nudged my rebuild cost to the top of the range of estimates, just to provide me with some headroom if the worst should happen. It also prevents you from over-insuring yourself.

Bedroom-rated cover estimates the cost of rebuilding your home based on the number of bedrooms you have. These types of policy protect you from under-insuring and provide very high sum-insured cover. Bedroom rated cover is quite straightforward and you don’t have to worry about calculating the rebuild cost of your home. It’s important to bear in mind, however, that you could end up over-insuring yourself and paying for cover that you might not need.

There are a whole host of things that are excluded from buildings insurance, such as damage caused by wear and tear or neglect of your property. And you will find that any accidental damage cover is limited for a standard policy. This may be the add-on you wish to consider for your policy – making sure that the human error that happens in our homes can be covered. It will increase the cost of your policy.

Which? publishes reviews of dozens of buildings insurance policies to help you find the right one for your needs. Visit which.co.uk/homeinsurance.

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