Do I Need House Insurance for a Mortgage? | Yes, you do. If you are taking out a mortgage, most lenders will require you to have house insurance, also known as buildings insurance, in place before completion. This is because your mortgage provider has a financial interest in your home. They want to ensure it is protected against damage from fire, flooding, or other risks. Without coverage, you could face significant repair costs or even lose the property, which would put the lender at risk as well.
Protecting your belongings is vital for safeguarding your home. Buildings insurance covers your property’s structure, but it’s essential to consider the contents inside. This is where contents insurance proves invaluable, offering financial coverage for furniture, appliances, valuables, and personal items.
Contents insurance protects against theft, damage, and loss. It ensures you can repair or replace belongings without bearing the entire cost. Replacing your possessions could result in significant financial strain without this cover.
What Does House Insurance Cover?
Buildings insurance covers the structure of your property. This includes the roof, walls, windows, permanent fixtures, and fittings such as kitchens and bathrooms.
Some policies may also cover:
- Garages and outbuildings
- Pipes and drains
- Fire and storm damage
- Theft or vandalism to the structure
This type of cover is different from contents insurance, which protects your belongings inside the home. Contents cover is optional but highly recommended.
To understand how house cover compares with other protection products, visit our Home Insurance page.
Is House Insurance Legally Required?
House insurance is not legally required to own a home outright. However, if you have a mortgage, most lenders require it. It protects both your investment and theirs.
Even if you have paid off your mortgage, having house insurance is still important. Your home is likely your biggest asset. Protecting it makes financial sense.
When Do I Need to Arrange Cover?
You should arrange buildings insurance as soon as you exchange contracts. That is when you become legally responsible for the property. If something happens before you move in and there is no cover, you could face major costs.
Your lender may suggest an insurance provider. However, you are not obligated to use them. You are free to shop around and compare quotes, provided the policy meets the lender’s requirements.
Determining the Right Level of Buildings Insurance Cover
When setting up buildings insurance, it’s essential to choose the right level of cover. Your home must be insured for the full cost of rebuilding it from the ground up. This value is called the sum insured.
The rebuild cost is not the same as your property’s purchase price or market value. In most cases, the rebuild cost is lower than the market value. That’s why accurate calculations matter. Overinsuring could result in higher premiums than necessary. Underinsuring may leave you paying out of pocket if significant damage occurs.
To help homeowners find an accurate rebuild figure, the Association of British Insurers offers a calculator through the Building Cost Information Service.
Some insurance providers offer unlimited buildings cover. These policies eliminate the need to calculate the rebuild cost manually. While that may offer peace of mind, choosing a policy tailored to your known rebuild figure is often more cost-effective.
What Happens If I Do Not Have Insurance?
If you do not have insurance and your home is damaged, you may be responsible for the repair costs. In serious cases, such as a fire or flood, the home could become uninhabitable. Without cover, this creates serious financial risk.
In some cases, your mortgage agreement may allow the lender to arrange cover for you and add the cost to your payments. This may not be the most affordable option.
Special Considerations for Unique Properties
If your home has special features such as a thatched roof, is a listed property, or has unusual construction materials, it’s important to approach insurance with extra care. In these cases, a survey from a qualified professional, such as a member of the Royal Institution of Chartered Surveyors (RICS), can help provide an accurate estimate of the rebuild cost. This ensures your buildings insurance is based on realistic figures, avoiding underinsurance or overpayment.
Choosing the Right Buildings Insurance Cover
Selecting the right buildings insurance starts with knowing the cost to rebuild your home. This is not the same as the market value. The rebuild cost includes labour, materials, and professional fees. You can estimate it using online tools or by commissioning a survey. Regularly reviewing your policy helps keep your cover up to date as property values, building regulations, or personal circumstances change.
Why Buildings and Contents Insurance Matter
Buildings insurance is typically a requirement from mortgage lenders. It protects the property’s physical structure, including walls, roof, and permanent fixtures. This ensures the lender’s investment is protected against events such as fire, flooding, or storm damage.
While your lender does not require contents insurance, it provides valuable protection for personal belongings such as furniture, electronics, and clothing. Having both policies in place helps protect your home and lifestyle.
For help selecting the right level of protection, you can “Find Mortgage Advisers” who understand your situation and can compare suitable options.
Protecting Your Home and Mortgage
Investing in both buildings and contents insurance supports long-term homeownership. It provides financial cover in emergencies and ensures you remain compliant with your mortgage conditions. It also helps maintain your home’s value and reduces the risk of out-of-pocket costs after unexpected events.
Homeowners with complex or higher-value properties may also benefit from tailored policies. These can include extended cover, alternative accommodation, or cover for heritage features. Your adviser can recommend providers that offer these options.
If you’re a mortgage professional assisting clients with protection planning, you can “Join our Mortgage network” to access tools and support designed for industry specialists.
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