Buildings Insurance UK: What It Covers, What It Costs and What the Law Requires

What Is Buildings Insurance

Buildings insurance covers the physical structure of a property -- the walls, roof, floors, ceilings, windows and permanent fixtures such as fitted kitchens and bathroom suites -- against damage from specified events (perils). Standard perils covered include fire, lightning, explosion, flood, storm, subsidence, theft (attempted or actual), escape of water from pipes or tanks, and impact by vehicles or falling trees.

When Buildings Insurance Is Required

Buildings insurance is not a legal requirement for homeowners in the UK. However, it is a standard condition of most residential mortgage agreements -- lenders require borrowers to maintain adequate buildings insurance throughout the mortgage term as a condition of the loan. Failure to maintain cover can technically constitute a breach of the mortgage terms.

Rebuild Cost vs Market Value

Buildings insurance should be arranged for the rebuild cost of the property -- the cost to demolish and rebuild it from scratch -- not the market value. The rebuild cost and market value can differ significantly, particularly in areas where land values are high. Most insurers provide a rebuild cost calculator or use the Association of British Insurers' rebuilding cost assessment guidance. Underinsurance (insuring for less than the rebuild cost) can result in reduced claim payments.

What Is Typically Excluded

Standard buildings insurance policies typically exclude: gradual deterioration or wear and tear, damage caused by failure to maintain the property, damage resulting from an unoccupied property (usually after 30 to 60 days unoccupancy), deliberate damage by the owner, and certain types of flood in high-risk areas (or flood cover may carry a higher excess). Subsidence exclusions vary -- some policies exclude subsidence in specific soil types.

Leasehold Properties

Leasehold flat owners typically do not arrange their own buildings insurance. Instead, buildings insurance for the whole block is arranged by the freeholder or managing agent, with the cost passed to leaseholders as a service charge. Leaseholders should check what the block policy covers and whether they need separate contents or liability insurance for their flat.

Frequently Asked Questions

Is buildings insurance a legal requirement?

Buildings insurance is not required by law in the UK. However, most mortgage lenders require it as a condition of the mortgage. Homeowners without a mortgage have no legal obligation to insure the building, though doing so protects against potentially catastrophic financial loss.

What is the difference between buildings and contents insurance?

Buildings insurance covers the structure of the property and permanent fixtures. Contents insurance covers the possessions inside the property -- furniture, electronics, clothing and personal items. Most insurers offer these as a combined home insurance policy or separately.

Does buildings insurance cover flood damage?

Most standard buildings insurance policies include flood cover as a standard peril. However, properties in high-risk flood areas may face restrictions, higher excesses or flood cover exclusions. Flood Re, a joint initiative between the government and the insurance industry, provides a reinsurance scheme that helps make flood cover available and affordable for eligible high-risk homes.

How is buildings insurance calculated?

Buildings insurance premium is based on the rebuild cost of the property, the location (postcode affects flood, subsidence and crime risk), the type of property and construction, claims history, and the excess chosen. Postcode risk data is maintained by insurers using data from the Environment Agency, British Geological Survey and local authorities.