Buildings and Contents Insurance: What Homeowners Need to Know

Buildings and contents insurance protects your home and what is inside it. Buildings insurance pays to repair or rebuild the structure, such as the walls, roof and fitted kitchen. Contents insurance pays to repair or replace your belongings if they are stolen, lost or damaged. Most mortgage lenders require buildings cover.

Of all the insurance linked to buying a home, buildings cover is the one your lender will check. Get it wrong and you could delay your purchase, or worse, find out at claim time that your home was underinsured.

This guide explains how buildings and contents insurance works, the figures that really matter and the situations where a standard home policy is not the right fit. It sits alongside our UK protection insurance guide, which covers the life, illness and income protection that protects you rather than your property.

What is the difference between buildings and contents insurance?

	Buildings insurance	Contents insurance
Covers	The structure and permanent fixtures	Your belongings and furnishings
Examples	Walls, roof, floors, windows, fitted kitchen and bathroom, pipes and wiring	Furniture, clothes, electronics, jewellery, carpets and curtains in many policies
Needed for a mortgage?	Usually a condition of the mortgage	Not required, but strongly worth having
Sum insured based on	The cost to rebuild the home	The cost to replace your belongings
Who arranges it in a leasehold flat	Usually the freeholder	You

A simple way to remember it: if you turned your home upside down, anything that would fall out is contents. Anything that stays put is usually buildings.

Many people buy both together as a combined home insurance policy. That can be simpler, and it avoids arguments between two insurers about whether damage falls under buildings or contents.

Is buildings insurance a mortgage requirement?

Yes, for almost all mortgages. MoneyHelper explains that you do not legally need buildings insurance, but if you buy with a mortgage you will be “contractually obliged” to have it. It also says you “should have buildings insurance in place as soon as you exchange contracts on the property” (MoneyHelper).

Exchange is the point at which the purchase becomes legally binding. From then on you are legally committed to the purchase, so MoneyHelper advises having cover from that date. That is why cover needs to start at exchange, not on the day you move in.

What to do:

1. Start looking for a policy as soon as you have an expected exchange date.
2. Set the start date to the exchange date.
3. Check your mortgage offer for any specific insurance conditions.
4. Give your solicitor or conveyancer the policy details if they ask for them.

If you are buying your first home, our first-time buyer mortgage advice walks you through the whole process, including when insurance fits in. If you are moving home, remember to arrange cover for the new property from exchange while keeping cover on the old one until you complete the sale.

How much buildings insurance do you need: rebuild cost or market value?

Buildings insurance should be based on the rebuild cost, also called the reinstatement cost. This is what it would cost to rebuild your home from the ground up, including demolition, clearing the site, materials, labour and professional fees.

It is not the same as the market value, which is the price your home would sell for.

	Rebuild cost	Market value
What it measures	The cost of rebuilding the structure	What a buyer would pay
Includes the land?	No	Yes
Affected by location?	Mainly through local building costs	Heavily
Used for buildings insurance?	Yes	No

The rebuild cost can be lower than the market value, because the land does not disappear if the house burns down. It can also be higher, for example with older or listed homes built with materials and methods that are expensive to reproduce. Your mortgage valuation or survey may include an estimate of the rebuild cost. Many insurers also offer online rebuild calculators.

What happens if you are underinsured?

If your sum insured is lower than the true rebuild cost, many policies can reduce a claim in proportion to the shortfall. This catches people out because it applies even to small claims, not just a total loss.

Some policies offer unlimited buildings cover or a high fixed limit, which removes this risk. Either way, check the rebuild cost when you buy and after any extension or major work.

What does contents insurance cover?

MoneyHelper describes it simply: “If items in your home are stolen, lost or damaged, contents insurance should give you the money to help put things right” (MoneyHelper). Standard cover usually includes events such as theft, fire, flood and escape of water.

To set the right amount, go room by room and add up what it would cost to replace everything new. Most people are surprised by the total. Clothes, kitchen equipment and electronics add up fast.

Accidental damage

Accidental damage cover is usually an optional extra. It pays for one-off, unexpected damage, such as red wine spilt on a carpet, a television knocked off its stand or a drill slipping through a pipe. MoneyHelper notes that you can “pay extra to include cover” for it. It can be added to buildings cover, contents cover or both. If you have young children, pets or expensive furnishings, it is often worth the extra cost.

High-value items

MoneyHelper notes that “many policies will have a single item limit, often around £1,500”, and that items above that limit usually have to be listed on the policy. Typical examples are:

• engagement rings and other jewellery
• watches
• art and antiques
• high-end bikes, cameras or musical instruments.

If you do not list them, a claim may be limited to the single item limit, however much the item was worth. Keep receipts, valuations and photos somewhere safe outside the home.

Personal possessions away from home

Items you carry with you, such as phones, laptops and jewellery, are often only covered outside the home if you add personal possessions cover. Check this if you commute with a laptop or travel often.

How do excesses and claims work?

The excess is the part of each claim you pay yourself. MoneyHelper says it is “typically between £50 and £250” for contents insurance. Policies often have a compulsory excess, set by the insurer, and a voluntary excess that you can choose to raise in return for a lower premium. Some types of claim, such as escape of water or subsidence, often carry a higher excess.

Step	What happens
1. Make the home safe	Stop the leak, secure the property and prevent further damage where you safely can
2. Report it	Contact the insurer as soon as possible. Report theft to the police and get a crime reference
3. Gather evidence	Take photos and keep damaged items, receipts and any repair quotes
4. Assessment	The insurer checks the claim is covered and may send a loss adjuster for larger claims
5. Settlement	The insurer repairs, replaces or pays you, less the excess

A higher voluntary excess lowers the premium, but only choose a figure you could comfortably pay at short notice. A small claim can also affect what you pay at renewal, so for minor damage it is worth weighing up whether to claim at all.

Do you need buildings insurance if you own a leasehold flat?

Usually not for the building itself. The Leasehold Advisory Service explains that “usually the landlord will be responsible for arranging buildings insurance”, meaning the freeholder, and leaseholders contribute through the service charge (LEASE). If you share the freehold with other leaseholders, you are jointly responsible.

What to do if you are buying a leasehold flat:

• ask your solicitor to confirm who insures the building under the lease
• get a copy of the buildings insurance schedule and check it is enough for your lender
• check the excess, as you may have to pay it if the damage starts in your flat
• arrange your own contents insurance, because the freeholder’s policy does not cover your belongings.

Your lender will still want to know the building is properly insured, so this is something your solicitor should check during the purchase.

What if you let out the property?

A standard home insurance policy is designed for a home you live in. If you rent out a property, you will need a specialist landlord insurance policy instead. Telling your insurer is not optional: a let property on a standard home policy may not be covered at claim time. Your buy to let lender will usually require suitable cover as a condition of the mortgage, so check your mortgage offer and speak to a specialist landlord insurance provider.

What affects the cost of buildings and contents insurance?

• Where you live, including flood risk, subsidence risk and local crime rates.
• The type, age and construction of the property. Non-standard construction or thatched roofs can cost more.
• The rebuild cost and contents value.
• Your claims history.
• Security, such as approved locks and alarms.
• The excess you choose.
• Optional extras, such as accidental damage, personal possessions and legal cover.

The cheapest policy can look very different once you compare the excess, the single item limit and whether accidental damage is included.

Who needs buildings and contents insurance?

You are	Buildings insurance	Contents insurance
A homeowner with a mortgage	Required by your lender	Strongly recommended
A homeowner with no mortgage	Not required, but you carry the full risk	Strongly recommended
A leasehold flat owner	Usually arranged by the freeholder	You arrange it
A tenant	Your landlord’s responsibility	You arrange it for your own belongings
A landlord	You need specialist landlord insurance	Only for furnishings you provide, through landlord cover

What are the most common buildings and contents insurance mistakes?

1. Starting cover on completion instead of exchange. You are legally committed from exchange, so MoneyHelper advises cover from that date.
2. Insuring for the market value. It is the rebuild cost that counts.
3. Underestimating contents. Go room by room and add it all up.
4. Not listing high-value items. A claim may be capped at the single item limit.
5. Choosing an excess you could not afford. The saving on the premium is small compared with the cost at claim time.
6. Forgetting to update cover after an extension or renovation. The rebuild cost may have risen.
7. Using a standard home policy for a let property. Landlords need a specialist policy.

How Option Finance helps with buildings and contents insurance

We are mortgage and protection advisers, so we make sure your insurance lines up with your mortgage rather than becoming a last-minute job. We will:

• arrange buildings and contents cover that starts when your lender needs it
• compare cover and excesses across insurers, not just the cheapest price
• explain how to work out the rebuild cost and contents value
• talk you through excesses, accidental damage and high-value items
• point out the questions to ask your solicitor if you are buying a leasehold flat
• look at your wider protection, such as income protection insurance, critical illness cover and decreasing term life insurance, alongside your mortgage.

If you are a landlord, you will need a specialist landlord insurance policy, which we do not arrange.

How we are paid. There is no fee for our protection advice. We are paid by commission from the insurer you choose. If we are arranging your mortgage, protection advice is included at no extra cost.

Frequently asked questions

Speak to Option Finance about buildings and contents insurance

Whether you are buying your first home, moving or remortgaging, we will make sure the insurance your lender needs is in place on time and that the rest of your protection fits your mortgage, with no obligation to go ahead.

Book a free initial consultation using the enquiry form below. See also our UK protection insurance guide, remortgage advice, moving home advice and mortgage guide.