The lender's mortgage offer had one condition in bold, halfway down page two: buildings insurance must be in place from exchange of contracts. I'd skimmed past it the first time, assuming insurance was something that began when the keys did. It wasn't, and it took our conveyancer two sentences to explain why.
Why it starts before the house is ours
When contracts are exchanged, we become legally bound to buy the house, and the risk of anything happening to it passes to us at that moment. If the place burned down on the Thursday after exchange, we'd still owe the full price on completion day, and the lender would still have lent against a pile of bricks. So the lender wants cover live from the day of exchange, and the insurer needs to be told which day that is. We exchanged on Wednesday 15 January, and the policy started that morning.
I'd compared quotes the week before, on a comparison site and then by phone with two insurers, and bought the policy on the Tuesday evening, with cover starting the next morning, the day our conveyancer thought we might exchange. If exchange had slipped, I'd have had to ring and move the date. It felt a bit like pre-booking a taxi to a party I wasn't sure was on.
Rebuild cost is not what the house is worth
I assumed the figure I'd have to give for buildings cover would be the price we paid, £187,500. It isn't, and that was the part I'd got wrong. The sum insured on a buildings policy is what it would cost to rebuild the house from scratch after a disaster: the bricks, the labour, clearing the site, the professional fees. Land isn't rebuilt, and neither is the view, so rebuild cost and market value can be far apart in either direction.
We used a rebuild calculator, the kind that asks for the type of house, the age, the floor area, the walls, the roof and the number of bedrooms. It asked for an end-of-terrace from the 1930s with a total of about 77 square metres, and gave us a figure of around £155,000. We rounded up to £160,000, partly as a cushion for building costs rising, and partly because under-insuring can make an insurer cut a claim down. Our conveyancer suggested using a calculator and then checking the figure with the insurer, and the lender wanted to see a sum that at least covered a rebuild.
The lender also asked for a copy of the policy schedule, which our conveyancer emailed on. Because the coal mining report had made me twitchy, I checked that subsidence was among the things covered. It was.
What it cost, and what I noticed on the second read
We took combined buildings and contents cover. The buildings are insured for £160,000 and the contents for £35,000, which I thought was too high until I started adding up the kitchen, the clothes, two laptops and Matt's workshop tools, which alone come to a few thousand. The whole thing is £296.40 for the year, paid in one go. Monthly instalments were on offer, but when I looked, they cost noticeably more over twelve months, because a monthly plan is effectively a small loan.
The policy has an excess of £250, made up of £100 that the insurer insists on and £150 we chose, as a higher excess lowers the price. There's no accidental damage cover in the first year, so a drill dropped through the bath would be ours to fix. I only noticed the other number at the weekend, on page nine, when I read the schedule properly with a cup of tea. For escape of water, the excess is £350, higher than for anything else. I stopped and looked at that one for a while, thinking about bathrooms.
If I did it again, I'd read the schedule before I paid, not after. The £350 was on page nine the whole time. I'm saying what we chose and why, but every house and every insurer is different, so check your own policy wording and ask your lender what it needs and from when.
All the documents are in a folder called "house: insurance", next to a folder called "house: everything else", which now has 14 files in it.
