Insuring your first home
Have you saved money, found the right property, had the mortgage agreed, and have a hopeful exchange date on the calendar? If so, it could be the time to think about first-time home-buyer insurance. Here, MoneySuperMarket breaks down exactly what you need to know.
Home insurance comes in two parts: buildings and contents. As a rough benchmark, if you could pick up your new house and turn it upside down, everything that stayed put (e.g. walls, windows, and fitted kitchen) would qualify as buildings insurance. Instead, everything that fell out, such as your clothes, carpets, and furniture, would come under contents insurance.
Buildings insurance can be called upon if the structure of your home is damaged. This could be, for example, in a fire, flood, or storm. You can claim for your belongings with contents insurance in these events too, or if they are damaged loss through theft or loss. Terms and conditions, such as the limit you can claim against one single item, vary between insurers. So always check the small print carefully.
Now you’re a homeowner…
If you come from a rented home or house share, you may have bought contents insurance before. However, buildings insurance will almost certainly be new to you. This is because, in rented accommodation, the landlord would be responsible for insuring their own bricks and mortar. You will only need to insure your own belongings within it.
Most contents policies will cover your belongings against damage and lost while in transit, but only if you use a professional removals company
Where should I buy first-time home-buyer insurance?
Years ago, it was a rule that you had to buy your buildings cover from the lender you were getting your mortgage from. But that's no longer the case.
Now, you can buy both buildings and contents insurance from any provider. But don’t just opt for the first one you see. You could save money each year by shopping around for the cheapest first-time home-buyer insurance policy – and it doesn’t mean you will have to skimp on the level of cover either. You can compare policies and find out what each one offers at our home insurance channel.
When should I buy home insurance?
Don’t wait until you have moved in, though, to buy your first-time homebuyer insurance. Your buildings insurance should be in place at the point you exchange contracts with the seller of the property, as this is when you become legally obliged to buy.
Even with contents insurance, you will need to make sure you have your policy in place before you start moving all your things to the new house. In fact, they could be damaged in transit.
Most contents policies will cover your belongings against damage and loss while in transit, but only if you use a professional removal company. The policy may also state that any delicate or fragile items are packed by the removals firm. Alternatively, the removal firm itself may offer 'goods in transit' insurance.
How much should I insure my home for?
When buying buildings cover, you'll be asked to put a rebuild value figure on your property. This is what it would cost to completely rebuild the house if it was razed to the ground.
But the price you paid for your home and its rebuild value are not the same thing. The main value of a home is in the land, which varies enormously depending on location. The raw materials and labour required to build a house are much more consistent in price wherever you are in the country.
You can get an accurate estimate of your rebuild cost using the Buildings Cost Information Service's (BICS) free calculator here.
When buying contents insurance, it's simply a matter of estimating the value of each of your possessions. Note that this is the cost of replacing each item rather than what it is currently worth. Then, you would add it all up to reach a total figure which is known as the 'sum insured'. Based on MoneySuperMarket data, the average value of a household's contents is just over £40,000, but we have a contents calculator to take some of the arithmetic out of it for you.
What does home insurance cost?
Contents insurance will depend mainly on the postcode area of your new home and the previously mentioned sum insured. It also includes any extras you choose to add on, such as accidental damage cover. You will also pay less if you have previously built up a number of years where you didn't claim with a previous insurer. This is known as a no-claims discount (NCD), but it may be an advantage for the future rather than one you can benefit from now.
But when it comes to buildings insurance, the premium is mainly related to your home's rebuild value, including whether you live in an area prone to flooding. Again, this is the insurer taking a view on how likely you are to make a claim and what it will cost it if you do.
As well as shopping around for the best home insurance deal, there are other ways to lower the cost of your premium. This could include taking your contents and buildings insurance with the same insurer, buying online, paying your annual premium in one lump rather than in monthly instalments, and increasing the level of excess (the first part of the cost of any claim) you're willing to pay upfront. You can read more about ways to cut costs on our home insurance page.
Your home may be repossessed if you do not keep up repayments on your mortgage.
When may first-time home-buyer insurance not protect you?
It is important to keep in mind that most home insurance policies won’t cover you for everything, even if it’s something contents or buildings related.
Here are some of the most prominent exceptions:
Wear and tear – gradual, ‘inevitable’ damage is not covered by home insurance. This can include issues such as damp, rusting, subsidence, and damage from pests (e.g. vermin)
Accidental damage – accidents can happen when you least expect them, from smashed windows to leaking pipes. Standard home insurance is unlikely to offer cover for unexpected problems, but you can usually find this type of protection as a handy add-on
Negligence – in most cases, carelessness (e.g. forgetting to lock doors, setting alarms, etc) is not covered by home insurance
Pet damage – some policies won’t cover for any animal-related accidents. This means that if, say, your cat scratches your walls and furniture, your home insurance is unlikely to cover for the repair costs
Do I need buildings insurance on a new build?
New builds tend to come with a warranty, but it’s likely that mortgage lenders will expect you to take out buildings insurance nonetheless.
New-build homes are by definition ‘new’, and a warranty should cover you for a number of accidents. However, it won’t protect you against all types of mishaps, which is why it’s always wise to get buildings insurance.
Bear in mind that, sometimes, new builds are constructed on a new postcode that may not yet be on your insurer’s system. In this case, make sure to inform your builder or developer – they will help you get your postcode registered.
Compare first-time homebuyer insurance with MoneySuperMarket
It is important that, as you purchase a new property, you feel both safe and confident that you can enjoy it with much-needed peace of mind.
Comparing home insurance with MoneySuperMarket is a quick and easy way to find an affordable policy. Just tell us a little about yourself and the cover you need. We’ll search the market for a list of quotes tailored to your requirements.
Also, using a mortgage comparison tool can help you get a good idea of the kind of mortgage deals available. When you enter your information into our mortgage comparison tool, you’ll be able to compare example mortgage quotes from different providers.
