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Last updated 8/28/2008

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Guide to buildings insurance

Home insurance may sound desperately dull, but the increasing incidence of extreme weather conditions in the UK means that it is more important than ever to ensure that your property is properly covered.

Buildings insurance protects you against the cost of damage to the structure of your home from the elements and is mandatory if your property is mortgaged. Home contents insurance, by contrast, is entirely voluntary, but some insurers offer discounts if you buy both policies together

Arranging buildings insurance is normally the responsibility of the person who owns the property. If you live in a leasehold property, it is usually the responsibility of the freeholder to arrange buildings insurance and the cost will be passed onto leaseholders via a service charge (unless you have negotiated a ‘right to manage’ agreement with the freeholder).

In leasehold flats and maisonettes, each apartment is normally insured under a single block policy, which also covers the ‘common parts,’ such as the hallway, stairways and lifts.

What does buildings insurance cover?

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 permanent fixtures and fittings such as built-in kitchen units and appliances, bathroom suites and toilets and built-in cupboards.

Cover may extend to outbuildings (such as garages and greenhouses) under some policies. Boundary walls, fences, gates, drives, paths and swimming pools may be covered for an extra premium, depending on individual policy terms and conditions.

The building should be insured for its full rebuilding cost, not the market value of the property. If you underinsure, your insurer will reduce your claim proportionately.

What's covered?

The common risks covered are damage to, and destruction of, the property as a result of

fire, storm and flood, lightning, explosion and earthquake; subsidence, heave and landslip; riot and vandalism, theft; aircraft (collision or fallout), falling trees, breaking or collapsing aerials, impact by animals and vehicles; water leakage from pipes or tanks and oil leakage from heating installations.

Policies may also cover:

  • liability for damage to third parties and/or their property, up to a given limit (typically £1m);
  • the cost of alternative accommodation in the event that you have to leave your home while it is being rebuilt or repaired, up to a reasonable level;
  • accidental damage to underground water, gas and sewage pipes and electrical cables;
  •  replacement of glass in windows, doors and skylights.

Remember to inform your insurer if your home is used for business purposes, as this could increase the risk (particularly if you keep certain materials and equipment on the premises).

Mitigating your losses

Policyholders are required to keep losses to a minimum by taking pre-emptive action to contain or prevent damage. Thus, if you spot signs of subsidence for example, you should report this to your insurer immediately so that the situation can be assessed and the problem can be fixed at minimum cost.

Don't skimp on home repair costs. Cheap skate repairs can result in more serious problems later, triggering expensive claims (and possibly the loss of your no claims bonus).

Excess and exclusions

Certain losses are not covered or are only partially reimbursable. The policyholder has to meet some of the cost of each claim, known as the ‘excess’ (typically the first £100 of each and every claim), which serves to keep policy premiums down and to deter trivial claims.

Damage caused by subsidence, heave and landslip is usually subject to a higher level of excess, typically £1,000.

Common exclusions are losses arising out of:

  • war
  •  frost damage
  •  sonic bangs
  •  radioactive contamination from nuclear fuel or waste.
  • Cover against damage caused by acts of terrorism is a recent exclusion, although this can be added through payment of an additional premium on some policies.

Calculating the sum assured

If you have an unusual or high value property, you may wish to commission a 'rebuilding cost assessment' from a member of the Royal Institution of Chartered Surveyors (http://www.rics.org.uk/).

This is advisable if your property has unique features (for instance, historic or listed buildings which will have to rebuilt in their original style), is constructed from special materials, and is more than two storeys high and/or has a basement or cellar.

It is possible to do the calculation yourself for a standard dwelling, although you may find that you have to call on a local architect or building firm to assess the cost per meter for rebuilding.

Alternatively, the Association of British Insurers has an online cost calculator and more information on how to calculate the rebuilding cost of a property at: http://abi.bcis.co.uk/

Rebuilding costs depend on the floor area of the structure (including garages, outbuildings, walls, fences and any other external structures), the type and age of the dwelling and the region in which it is located (for instance, building costs vary considerably according to area), as well as fixtures and fittings that are part of the fabric of the building.

Don't forget to add in the cost of site clearance, architect and engineers' fees, and emergency accommodation.

The sum assured needs to be adjusted periodically in order to reflect increases in building costs. Most insurance policies will automatically index your cover each year.

However, the insurer will not be aware of any home improvements or addition to your property such as a conservatory, loft extension, new fitted kitchen, unless you report them, so you may well find yourself underinsured if you fail to do so. Your insurer is entitled to reduce claims to reflect any such under insurance.

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