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Household Insurance » Buildings
Buildings insurance is an essential cover as it protects you against the cost of damage to the structure of your home from the elements.
Buildings insurance covers the cost of rebuilding or repairing damage to your property, other than that arising through wear and tear. The policy will cover the building's structure, including its permanent fixtures and fittings such as built-in kitchen units, bathroom suites and toilets, and built-in wardrobes.
The definition of buildings usually also includes outbuildings such as garages and greenhouses. Cover can also be provided to include fences, gates, drives, paths, swimming pools and boundary walls; however, cover can vary between providers.
If your property is mortgaged buildings insurance is usually required as part of the conditions of your mortgage. Arranging this insurance is normally the responsibility of the property owner, so if you are renting your home, your landlord is usually accountable for insuring the buildings. Without this cover, if your home was severely damaged, most people would not be able to pay for the cost of repair.
What buildings insurance covers
A building is typically insured against a number of ‘specified perils’, and is normally covered against loss of, or damage to, the property as a result of:
- Fire, explosion, lightning or earthquake
- Storm or flood
- Riot, civil unrest, strikes, and labour or political disturbances
- Malicious acts
- Impact from aircraft or other flying objects, or anything falling from them
- Water escaping from water tanks, pipes, equipment or fixed heating systems
- Water freezing in tanks, equipment or pipes
- Oil leaking from a fixed heating system
- Theft or attempted theft
- Falling radio or television aerials and dishes, and their fittings and masts
- Subsidence or heave of the land that the buildings stand on, or landslip.
- Falling trees or branches.
- The cost of alternative accommodation in the event that your home becomes uninhabitable following loss or damage to your buildings;
- Accidental damage to underground water, gas and sewage pipes and electrical cables;
- Cover against the costs of tracing and accessing a leak;
- Replacement of glass in windows, doors and skylights;
- The costs involved to replace the locks of you home if your keys are lost or stolen.
- Liability for accidental injury, loss or damage to third parties and/or their property, up to a given limit (typically £2m);
Accidental damage cover
Most buildings insurance policies will offer the option to extend cover to include accidental damage. For example, if you were in your attic and put your foot through the ceiling, then the repair costs would be covered.
Excesses and exclusions
An excess is the first part of a claim that is not covered by your insurance policy. Excesses are either applied on a compulsory or voluntary basis in return for a reduction in the premium. Compulsory excesses that are applicable can vary and are also dependent on the type of building that is insured.
Most insurance providers apply an excess to deter trivial claims, and these excesses generally range from £50 to £100. In addition, many insurance providers will allow you to take an increased ‘voluntary’ excess in exchange for a reduction in the premium. This option is not available for claims made for damage caused by subsidence, heave and landslip; for which claims that are made are usually subject to a higher level of excess, typically around £1,000.
There are a number of common exclusions, which are usually referred to as ‘general exclusions’ that are applicable within an insurance policy. These exclusions can include losses arising out of:
- Sonic bangs
- Radioactive contamination from nuclear fuel or waste
- Wear and tear.
Buildings Sum Insured
The sum insured that you declare is one the most important factors when taking out buildings insurance and should always be based on the full ‘rebuild cost’ of your property and not its ‘market value’.
This is primarily because you do not need to insure the land, which is not part of your buildings, but is included when your home is valued. If your property was burnt to the ground, you should be insured for the cost to rebuild the property to the exact specification prior to the fire.
Many insurers now provide a set sum insured limit. Generally a high sum insured of £250,000 or more is given, whilst some insurers provide ‘unlimited’ cover for your buildings. These limits are given as standard, irrespective of whether the correct sum insured is less than the automatic cover provided. The limits will generally be acceptable to the majority of consumers; however, if you are a mid or high-net-worth individual, these limits may be too low.
Calculating the correct Sums Insured
The rebuild cost of a property may be found on any applicable mortgage agreement, but factors including rising property values mean that sums insured should be regularly reviewed. You can use the home insurance rebuilding calculator on the Association of British Insurers' website, which provides a guide on how to calculate your home's rebuilding cost.
Failing to insure the correct amount will mean that when a claim is made, the insurer could apply an insurance term known as ‘average’ or ‘underinsurance’. This means that any claims payment will be reduced by the percentage that the property is underinsured by.
Once you have taken out a buildings insurance policy, most insurers will apply a term known as ‘index linking’ at subsequent renewals. Usually there is no charge for any increase between renewal dates. This ensures that your sum insured is increased in line with any changes in the cost of rebuilding your property. Index linking can work properly only if your sum insured is right to start with.
If you make any home improvements to your property such as building an extension, installing central heating, or installing double glazing, you should contact us so that we can amend your policy accordingly. Do not rely on index linking alone to keep your sum insured up to date. Review your cover every few years.
Reducing your losses
Policies require that you take good care of your property and ensure that it is maintained and in a good state of repair. For example, if signs of subsidence are spotted they should be reported to your insurer immediately so that the situation can be assessed and the problem fixed at minimum cost.
Ensuring that your home is always in a good state of repair should help to reduce expensive claims, and in the worst scenario, the refusal of a claim because your property has not been maintained correctly