Buildings insurance explained
Buildings insurance covers the cost of repairing or rebuilding your property’s structure. Whether it’s for your main home or a property you rent out, here’s why homeowners need it, and how it works.
If you own a property, whether it’s your permanent residence, holiday home or a rental, buildings insurance is an important consideration. Even if it isn’t a requirement of your mortgage provider, it’s going to protect you against the full cost of rebuilding or repairing the property if it’s damaged or destroyed.
Every day in the UK, around £8 million is paid out by insurers for claims on home insurance policies, for reasons ranging from burst pipes to fire and explosion.
What is buildings insurance?
Buildings insurance covers the cost of repairing or rebuilding your home after damage. It’s for the physical structure, like the roof, floors and walls, and permanent fixtures and fittings, like fitted kitchens, built-in wardrobes and appliances, and bathtubs. It’s usually the things you wouldn’t take with you when you move.
You can buy buildings insurance and contents insurance separately or combined.
Who needs buildings insurance?
In the UK, around 16.5 million households have buildings insurance. You don’t have to take out buildings insurance by law, but most mortgage providers will ask you to have a policy in place before contracts are exchanged as a condition of the loan. It’s not usually compulsory to get the buildings insurance your mortgage provider offers, unless it’s part of the agreement. Though they might want to check that the cover you take out is enough to cover the rebuild cost.
If you’re renting out a property, buildings insurance is your responsibility. If you own a leasehold flat, the owner of the block may have buildings insurance, which means you won’t need a separate buildings insurance policy. But it’s sensible to check.
Whatever type of property you own, you'll want to know repair or rebuilding costs would be covered if the worst happened.
What buildings insurance covers
Most buildings insurance policies will cover damage caused by unexpected events like:
- flooding and storms
- fire and explosions
- burst, frozen or leaking pipes
- subsidence, when the ground beneath a building sinks
- theft and vandalism
- fallen trees, lampposts, aerials or satellite dishes
- vehicle or aircraft collision
Policies can also include outbuildings like garages, greenhouses and sheds, as well as driveways, outside walls and fences, but always check so you’re clear about the exclusions.
What buildings insurance doesn’t cover
With standard buildings insurance, you won’t usually be covered for:
- Everyday wear and tear and deterioration over time.
- Damage that happens after lack of maintenance, like roof tiles that aren’t replaced which leads to a leak, or a botched repair job.
- Accidental damage to your home, like drilling through a pipe by mistake or scorching your kitchen surface with a saucepan. Comprehensive accidental damage cover is usually an add-on, which costs extra. However, some policies may offer limited cover for breaking built-in fixtures like washbasins.
- A home left unoccupied for more than 30 days, unless you’ve let your insurer know beforehand and they’ve amended your cover.
How much should your cover amount be?
When you take out buildings insurance, the total cover amount, called the sum insured, should be enough to cover the cost of rebuilding your property if it was destroyed, including labour, materials, clearing the site and other expenses. The rebuild value isn’t the same as the market value of your home, which is the price you’d expect to sell it for, which is usually more.
There are a few ways the rebuild figure can be estimated:
More than half of insurers estimate the sum insured by the number of bedrooms in a property. This means you won’t need to tell them a figure when you apply. It’s a straightforward route, but keep in mind that the figure may be a higher sum than you need, as the insurer will want to make sure you’re not underinsured.
If it’s a sum-insured policy, you’ll need to calculate the estimated rebuild cost of the property and tell your insurer. If you’ve just bought your home, check your home valuation for this figure. Otherwise, you can get an estimate using the Association of British Insurers’ online rebuilding cost calculator, or pay a chartered surveyor to provide you with a figure.
If the property isn’t built with standard materials, which might mean it has a thatched roof or timber frame, or is a listed building, you’ll need to use a chartered surveyor. You may need a specific non-standard construction insurance policy.
Unlimited cover policies
If your buildings insurance policy offers unlimited cover, there’s no limit on the overall amount you can make a claim for, so you won’t need to find the rebuild cost or check you're not underinsured. This may be useful if you have a high-value property with a rebuild cost that’s more than the insurers’ standard limit, which is usually around £500,000. However, there may be limits and exclusions applied to specific types of claim, and you may pay higher premiums for that unlimited sum.
Don’t forget to update your cover over time
Your buildings insurance sum insured may need to be adjusted over time. If you make structural changes to your home, like a loft conversion or building a conservatory, after taking out a buildings insurance policy, tell your insurer. If you don’t, you may not have enough cover and it could invalidate your insurance.
The cost of rebuilding a property can increase over time, so take another look at the figure when you renew your policy. Some insurers index-link the policy, so any rise in rebuild costs are automatically accounted for, but it’s still a good idea to check this every few years.
It’s important to have enough cover. If you're underinsured for the full rebuild cost and make a claim on the policy, the payout may be reduced by the proportion of underinsurance for any claim you make on that policy. So say you’re only insured for 70% of the actual rebuild cost and need to make a claim for partial damage. If the insurer assesses that you’re underinsured by this amount they’ll only pay out 70% of the value of that claim. They may also cancel the policy.
Buildings insurance optional extras
If you’re looking for more cover than standard buildings insurance policies provide, you can pay for add-ons. Before you do this, check that the policy doesn’t already offer enough cover for what you need.
Home emergency cover
When added to a buildings insurance policy, home emergency cover can pay for fixing sudden and unexpected emergency issues, which might be:
- heating system failure
- plumbing and drainage problems
- broken locks on windows and doors
- electrical wiring breakdown
- pest infestations
This usually includes a 24-hour helpline, call-out fees, repairs, parts and labour by an approved tradesperson, and overnight accommodation, if you can’t stay in your home. This is up to a maximum amount, and the insurer will need to agree that it’s an emergency. Exactly what is and isn’t covered can vary between insurers, so always check your individual terms.
Accidental damage cover
This is for unexpected and unintended damage, which might include accidentally knocking a hole in the wall or mistakenly drilling through a cable, causing damage to the physical structure or permanent fixtures and fittings. Basic DIY mistakes may be covered, provided you’re not carrying out a job that requires specialist expertise you don’t have.
Legal services cover
This offers access to legal advice and services and covers legal costs for issues that aren’t your fault, up to a certain limit, and disputes about things like boundaries or poor quality building work. It can cover your whole family and extend to issues that aren’t related to your home, like inheritance and employment disputes.
Can you get standard buildings insurance for a holiday home?
A holiday home is different from a permanent home, so your insurance policy needs to reflect that. A property that isn’t occupied for a time presents different risks, like pipes freezing in winter and a higher likelihood of burglary.
Some insurers offer holiday home insurance, which takes into account times the property is left empty. There may be limits on how long that can be, so check the policy details. Depending on how you use your holiday home, you may also want to make sure your buildings and contents insurance includes:
- Accidental damage cover for your belongings and property if you or your guests break or damage them.
- Public liability insurance, which covers legal fees up to certain limits if a guest injures themselves in your property and takes action against you.
- Loss of income if your property is damaged and you can’t get rental income from paying guests for a time.
- Alternative accommodation for you or your guests if your holiday home is uninhabitable after damage.
Make sure you’re clear about the exclusions and any insurer conditions, like visiting the property regularly. If you let out your holiday home to paying guests, you’ll usually need to take out specialist holiday lettings insurance, or host insurance, as an add-on or separate policy.
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How does buildings insurance excess work?
Your policy excess is how much you agree to pay towards a claim. This is deducted from the payout amount. Any compulsory excess will be set by your insurer, but a voluntary excess is the amount you agree to pay on top of that. Usually, the higher the voluntary excess amount is, the lower your premium will be.
So if you have a compulsory excess of £100 and voluntary excess of £50, and make a successful claim for £800 to fix your roof after a storm, your insurer will pay out £650.
You may be charged a different excess amount for the type of damage, such as £1,000 for subsidence or escape of water, so check the policy information, so you don't get any unpleasant surprises if you make a claim.
If you go for a higher voluntary excess, make sure you can afford the reduced payout. You could also explore other ways to reduce your home insurance premiums, like buying combined contents and buildings cover, or paying annually rather than monthly.
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Holly champions clear, jargon-free writing. She’s been creating finance content for leading organisations for over 10 years, with expertise in insurance, wills and probate, and all things health. Read more