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The Crucial Cover: Why You Must Insure Your Property at Contract Exchange
18 November, 2025 3 minutes reading time
Securing Your Investment
The process of buying a house is complex, and therefore, it involves many legal steps. As a result, one essential requirement that demands careful attention is having buildings insurance from the moment you exchange contracts. This crucial stage is often overlooked or postponed, yet it is vital for protecting what is likely the most valuable investment you will ever make.
When the Risk Becomes Yours
Crucially, when you exchange contracts, the legal risk immediately transfers to you, the buyer. Although you don’t legally own the house yet (that happens at “completion”), any damage that occurs during that period becomes your responsibility.
For example, as the buyer, you are required to buy the house even if it burns down or floods. Therefore, the seller is no longer liable for any damage; the risk now lies with you. The insurance company steps in to provide funds for repair.
Additionally, if you are applying for a mortgage, the lender will require this insurance. They are lending a significant amount of money, so their investment must be safeguarded. Without proof of insurance, a mortgage cannot be secured, and the house purchase cannot go ahead.
Why You Need Cover
Imagine a fire or severe storm damaging the house just before your move-in date—protection against such unforeseen events is vital.
For instance, if a fire causes damage, insurance will cover reconstruction costs. Similarly, strong winds during a storm can damage the roof, and repairs will be covered by your policy. Floods resulting in water damage are also protected, ensuring you won’t have to bear the financial burden alone.
Without insurance, any damage would mean you pay out of pocket for repairs or rebuilding, which could lead to serious financial hardship.
Keep Completion Running Smoothly
Significantly, your legal team must verify that you have valid insurance before the completion date. Without this proof, the entire process could be delayed, risking postponement of your move and causing unnecessary stress.
It’s important to note that buildings insurance should start on the exchange of contracts; therefore, neglecting this can lead to serious financial issues. This insurance acts as a safety net, protecting your entire purchase from potential risks.
Leasehold & New-Build Properties
Special situations must be considered for specific property types:
- Leasehold Properties: The landlord or management company generally manages the building insurance, and the leaseholder simply reimburses them. Your legal team will ensure that the policy is active and premiums are paid.
- New-Build Homes: As the buyer, you usually bear the risk from exchange until completion. However, if the property is only partially constructed, this period can be lengthy, and securing insurance may be challenging. You might prefer the developer to insure the property until all works are completed.
Simple Insurance Checklist
Use this simple list to make sure your new policy is set up correctly:
| Items to Check | Cover Required |
|---|---|
| Rebuild Cost | Does the amount cover the full cost to rebuild the house (not just its market value)? |
| Start Date | Is the insurance active from the day you exchange contracts? |
| Lender Name | Is your mortgage lender's name listed on the policy? |
| What's Covered | Does it include events like fire, storm, and flood? |
| Empty House Rule | If the house is empty for a while, are you still covered? (Check the time limit) |
| The Excess | How much will you have to pay toward any claim before the insurance takes over? |
This quick check ensures the legal rules are adhered to and your new home is safe from the moment the contracts are signed.
Our Advice
Although it’s easy to overlook the importance of insurance when excited about buying a new home, neglecting this step can be expensive if damage happens. If you have any questions or need guidance about your property, please contact us. We’re here to help.
Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.
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