Buildings insurance: what does it cover and cost?

Buildings insurance is a vital part of home insurance; it covers the full cost of repairing or rebuilding your home if it gets damaged or completely destroyed. It is not required by law, although it is usually a condition for mortgages. As a homeowner, it is wise to protect your home from the unthinkable, so let us have a look at what buildings insurance covers, when you need to get it and how you can calculate the cost of yours.

Buildings insurance: what is it?

Home buildings insurance protects the physical structure of your home, meaning the walls, roof, windows, doors etc. It can also cover permanent fixtures and fittings, such as solar panels, toilets, baths, detached garages and swimming pools (if you are lucky enough to have one), as well as gates, fences and drives. Basically, it insures any part of your house that you cannot pick up and take with you if you move.

It does not insure your personal belongings and valuables, such as your TV, dining room table and sofas. You need to take out contents insurance to make sure these are protected. Contents and buildings insurance together make up a traditional home insurance policy.

What does buildings insurance cover?

In general, buildings insurance can cover your home from property damage and destruction caused by:

• Natural disasters, such as earthquakes, hurricanes and tornadoes;
• Fires and lightning;
• Water damage, like a burst pipe, and flood damage;
• Fallen trees, lamp posts etc.;
• Subsidence (when the ground under or surrounding your home collapses or sinks, causing damage to the structural integrity of your property);
• Vandalism;
• Theft and burglary;
• Emergency access (damage caused by emergency services).

A good policy will also cover the cost of alternative accommodation, such as a hotel or rented flat, while your home is uninhabitable and being repaired or rebuilt, as well as public liability if someone is injured because of an incident at your property.

The exact range of coverage varies from policy to policy. We advise you read any buildings insurance policy document to see what perils (flood, fire, theft…) are and are not covered before taking out the policy. It is also a good idea to compare policies to see what coverage different insurance companies provide, as well as to compare their insurance rates.

Maximum unoccupancy periodAll buildings insurance policies have a maximum unoccupancy period which usually ranges between 30 to 60 days. This means that if the property is left empty for longer than this amount of time (consecutively), the insurance will not cover any damage that occurs. If you know your property will be empty for extended periods, you may need unoccupied property insurance or, if the property is a holiday home, holiday home insurance.

What buildings insurance does not cover

Knowing the exclusions matters as much as knowing the cover. Buildings insurance generally will not pay out for:

• General wear and tear, deterioration or anything that breaks simply because it is old;
• Damp, rot, woodworm and pest or vermin damage;
• Frost damage to outside pipes or brickwork in many policies;
• Damage to a property left unoccupied beyond the maximum unoccupancy period;
• Faulty workmanship, poor design or unapproved building work;
• Deliberate or malicious damage caused by you or your tenants;
• The contents of your home, which need a separate contents policy.

A leak caused by a sudden storm can be covered, for example, but a leak caused by old, worn roof tiles will not be, so it pays to keep on top of maintenance. For a fuller breakdown, see our guide on what home insurance does not cover.

Am I covered when renovating my home?

It is vital you inform your insurance provider of any structural work (renovations, extensions, loft conversions) taking place on your home. If you do not, your insurer will not cover you for any damage that occurs while the work is taking place. Depending on the amount and cost of the work, your policy may need to be adjusted during this period.

Building insurance cost calculator: how much will yours be?

Buildings insurance should cover the full cost of rebuilding your home from scratch. This means that if a natural disaster literally wipes out your house, you will be covered to rebuild it from the foundations to the roof. Use the BCIS rebuild cost calculator to see how much yours will cost.

There are two ways of calculating your rebuilding costs: sum insured and bedroom rated.

1. Sum insured buildings insurance means you calculate your rebuilding costs based on an assessment of your area, type of property and the age of your home. Based on this cost, you ask for a set amount of cover e.g. £200,000;
2. Bedroom rated buildings insurance means your insurer will estimate your rebuilding costs based on the number of bedrooms you have. You will then be covered for this amount. Yes, this is less accurate than the sum insured calculation, but insurers tend to provide high coverage to protect you against being underinsured if the worst were to happen.

Houses that have special features, such as a thatched roof, often require a professional survey from the Royal Institute of Chartered Surveyors to determine the rebuilding cost.

Rebuild cost vs market valueConfusingly, your rebuilding cost will not be the amount you paid for the property. It will also not be the current market value of your home. The rebuilding cost takes into account the price of rebuilding your house from scratch, including labour fees and the price for materials, but not the value of the land. It can be higher or lower than the value of your home, which is why basing your cover on the market value is the most common (and costly) mistake homeowners make.

Your buildings insurance, no matter if it is sum insured or bedroom rated, will not allow for any extra property add-ons: sorry, you cannot add a bedroom when you rebuild! You are covered to rebuild your home exactly as it was.

Can the cost change over time?

If you make any structural changes to your property, e.g. add an extension, it is likely to increase your rebuilding cost. As mentioned earlier, you need to inform your insurer of any structural work being done on your property. After the work is completed, you will need to increase your buildings insurance if your rebuilding costs have risen.

Even if you do not make any changes or improvements to your property, it is a good idea to regularly reassess your buildings insurance to make sure you are always fully protected as rebuilding costs tend to rise over time. When your renewal arrives, it is also worth switching your home insurance policy to check you are not overpaying.

Do you need building insurance for a mortgage?

Nearly all banks and mortgage lenders require you to have building insurance for mortgages. Some lenders will offer their own policy, but you do not have to accept it: you can look around and choose your own (which is the wise thing to do). Your mortgage lender will have to approve your buildings insurance policy before they approve your mortgage.

Remember: if you are buying a home, you should have buildings insurance from the moment you sign the sales contract. Do not wait until you move in! After you sign the contract, you are the legal owner of the property and responsible for any damage that occurs.

Building indemnity insuranceBuilding indemnity insurance is different to buildings insurance. When you are buying a house, indemnity insurance can cover you from any legal problems with the property that come to light, such as issues with planning permission. It is usually a one-off policy payment made during the transaction process and is valid for the entire time you are the property owner.

Building insurance for landlords

Landlords (or landladies) should have buildings insurance. As the homeowner, you are responsible for any structural damage that occurs in your property. If a pipe bursts, you, not your tenant, have to sort it out. However, standard buildings insurance coverage may not be adequate as it does not typically protect against structural damage caused by your tenant (accidental or intentional).

The best option for landlords is to get landlord insurance. This includes buildings insurance designed for rented property (so will cover damage caused by the renter), and can also protect against loss of rental income. You can find out much more in our buy to let insurance guide.

Building insurance for renters

As buildings insurance is aimed at homeowners, renters do not need it. Your landlord should have buildings insurance that will cover any structural damage that occurs while you are living there, but this does not mean you do not need any insurance!

Your personal belongings and valuables will not be covered under your landlord's policy, even if they are damaged or destroyed because of structural damage like a burst pipe. As a tenant, you need tenants insurance to make sure all your possessions are protected.

What if I own a leasehold flat?

If you own a leasehold flat, you have two options when it comes to buildings insurance:

1. Your freeholder (the person you are leasing from) may have arranged buildings insurance, but you will need to pay for it. This amount can be included in your annual maintenance fees and service charges, so make sure you check your lease agreement;
2. If you have joined together with other leaseholders in your building to buy the freehold (e.g. the apartment building) you are all responsible for the buildings insurance. The best way to get insurance coverage is to group together and take out one policy for the entire building. This can get a bit complicated and confusing so it is best to speak to an insurance agent for advice.

Freehold vs leaseholdFreehold means you own the house and the land it is on. If you are the freeholder of a flat, it means you own a part of the building and part of the land it is on. Leasehold means you lease the property from the freeholder for a fixed period of time, usually long term (making it different to renting). Leasehold ownership is much more common with flats than houses.

Top 6 ways to compare insurance providers

Now you know all there is to know about buildings insurance, let us take a look at what you should keep in mind when searching for a good buildings insurance contract.

1. Rebuilding cost: make sure your policy covers the full amount needed to rebuild your property from the ground up;
2. Index-linked rebuilding costs: rebuilding costs rise over time. Some policies automatically increase your coverage in line with rising rebuilding costs so you are always fully protected;
3. What is covered: make sure you know exactly what you are covered for. You may need to buy additional insurance if certain things are not included in the base policy, such as accidental damage or loss and theft of keys;
4. Alternative accommodation: does your insurer provide you with accommodation (hotel, rented flat) while your house is uninhabitable and being repaired or rebuilt?
5. Maximum unoccupancy period: ensure you know how long the property can be left empty for while the policyholder remains fully covered;
6. Public liability coverage: a good buildings insurance policy will cover the costs of being sued if someone dies or is injured in, or because of, an incident at your property.

If you do need to use your cover, our guide on how to make a home insurance claim walks you through the process step by step.

All material on this page and the selectra.co.uk website is for information purposes only and does not constitute any form of financial advice. Selectra.co.uk is not responsible for any consequences that might arise from your use of the information provided.