Last updated: 01/10/2021 | Estimated Reading Time: 5 minutes
Home insurance for first time buyers
Getting yourself on the property ladder takes a lot of work. You've saved up for years, found a property that you like, sorted out a first-time buyer mortgage, and now you're hoping that everything goes well on the exchange date. But that's not when it all stops - this is when you need to sort yourself out with some home insurance.
Our guide will run you through all the things you need to consider when taking out your first home insurance policy as a homeowner.
In This Guide:
- How does home insurance work?
- Do I really need home insurance?
- Where should I purchase my home insurance?
- When is it best to purchase home insurance?
- How much should I insure my property for?
- How much should home insurance cost?
How does home insurance work?
There are two main parts to insuring your home: buildings insurance and contents insurance. The brick and mortar structures of your home, plus the fixtures and fittings, are all covered by a buildings insurance policy. Everything else, such as your personal possessions, furniture, carpets etc. are covered by a contents insurance policy.
Many people coming from a rented home will have purchased contents insurance before, but not buildings insurance. This is because a landlord is responsible for insuring the structure of their home, whilst the tenant only needs to insure their own belongings within the property.
You'd need to make a claim on your buildings insurance in the event that the structure of your home is damaged (for example in a storm, flood, or fire). You'd claim on your contents insurance for all the belongings inside your home that are damaged under the same unfortunate circumstances.
Additionally, you can make a claim on your contents insurance policy if you incur a loss or theft of your items too.
There are limits on how much you can claim for a single item (often up to £1000), and these vary from insurer to insurer, so you'll need to check your policy wording carefully.
Do I really need home insurance?
If you have a mortgage, then yes. If you don't have a mortgage, it's still a very good idea. If you've taken out a mortgage to cover the cost of buying your home, then your mortgage lender will require you to have a buildings insurance policy for the duration of your mortgage up until you've paid it all off. This is because the building society or bank wants to protect its investment until they no longer have any interest in the property.
Even if you own your home outright by using cash to purchase it, it's still highly advisable to purchase buildings insurance. Association of British Insurers (ABI) figures show that in 2012, there were 486,000 claims made due to flood and storm damage in the UK - that works out to 1330 claims every single day. Making a claim is a lot more common than you'd think, and it can cost you a lot if you're uninsured.
Where should I purchase my home insurance?
In the past it was compulsory for homeowners to purchase buildings insurance from the same lender that they were getting their mortgage from. Luckily, this is no longer the case, so you can purchase buildings and contents insurance from any provider you choose.
Shopping around for insurance is always a good idea. Money Expert can help you compare home insurance quotes from over 50 providers so you can find the best cover and price for your new home.
When is it best to purchase home insurance?
You'll need to have a valid buildings insurance policy in place before you exchange contracts with the seller of your property. This is the point at which you are legally obliged to buy the property.
As for contents insurance, its best to have a policy before moving in as you'll want to make sure that any expensive items are covered in case they are damaged in transit when you move in. As mentioned before, you'll need to use a professional moving company for your items to be covered by your policy, and you'll need to also make sure any fragile items are packed by the removals company themselves.
You can also find a removals firm that offers their own ‘goods in transit' insurance too.
How much should I insure my property for?
When taking out buildings insurance you'll need to tell your insurer what the rebuild cost of your home would be. This is how much it would cost you if your house was completely destroyed and you had to rebuild it from scratch.
This is not the same as how much you paid for your home. The value of most homes is made up by the location of the land - which can vary greatly across the country.
As for contents insurance, it's a simple case of going through your home and tallying up the value of all the individual items you own - this is known as the ‘sum insured'. Remember, you need to work with the value of replacing your items brand new, not what their current value is.
With both forms of insurance, you want to be as accurate as possible with your estimates. Under-insuring your property will leave you with a shortfall that you may not be able to afford - making your insurance somewhat useless.
How much should home insurance cost?
There are a variety of factors that affect the premium you'll pay for your home insurance. For contents insurance, the following factors affect the cost:
- The sum insured value area of your home
- The location of your home
- Any extras you add to your policy
In the future, a no claims discount (NCD) may also factor-in if you haven't made a claim on a previous policy and have built up a no claims discount.
As for buildings insurance, the monthly premiums you pay are heavily dependent on the rebuild value of your home, and if your home is located in an area that is prone to flooding.
In order to bring the cost of your premium down, you can try the following:
- Shop around to find the best deal, try using our home insurance comparison tool to find cheap quotes
- Purchase both forms of insurance from the same insurer so that you get a discount
- Paying the premium as a lump sum rather than in instalments
- Increasing the voluntary excess you'd be willing to pay but make sure you can afford it should you have to make a claim