A study of the policies available on a major price comparison website has indicated that over three out of 4 products listed make no provision for insuring a property between exchange and completion and could be voided completely during this period.
When a buyer exchanges contracts to purchase their new home, their conveyancing solicitor will instruct them to arrange buildings insurance for their new home with effect from the exchange date, in accordance with the Standard Conditions of Sale (5th edition) which passes the risk of the property to the buyer from exchange. This means that if a disaster occurs, like a fire, flood or burst pipe, it is the responsibility of the buyer to pay for repairs – the seller isn’t obliged to have any cover in force at all.
Many buyers will use internet price comparison sites to find the best household insurance deal. But failure to disclose the fact that the property they are insuring is actually still owned and lived in by someone else can cause many policies to be invalid, as the initial questions and assumptions confirm that the property is owned and lived in by the proposer. Having agreed that they own and live in the property (some sites don’t even give you the option to select otherwise), the customer, who hasn’t realised the significance of the statement, can happily purchase a policy which makes no allowance for their situation, effectively leaving them without cover.
There are a select few products which do offer cover within strict time limits. However, the only way to identify them is to read through every policy wording in turn to see if the cover is included. To make matters more complicated, some policies only offer the extension to existing policyholders and not on a new policy for the address being purchased.
So what should the buyer do to ensure they are covered properly between exchange of contracts and the completion date, when they can move to a standard home insurance policy?
Exchange2Completion.co.uk will provide a short period property insurance policy specifically designed to provide cover between exchange and completion. What is more, the policy also boasts legal expenses cover should action need to be taken against the seller in the event of agreements made in connection with the sale not being met, eg. An integrated kitchen appliance included in the sale being missing when the buyer arrives.
The buildings insurance is underwritten by Royal and Sun Alliance. Quotes and instant cover are available online at www.exchange2completion.co.uk
The study of online quote comparison results was carried out in August 2017 on a sample of over 70 quotations, which was reduced to 44 after multiple results from the same products were removed.