Who insures a property between exchange and completion?
Home insurance is a necessary protection on your property. But do you need home insurance from exchange or completion and who is responsible for it?
Do you need home insurance from exchange or completion in less than 15 seconds…
Insurance between exchange and completion is necessary to protect your interest. Your conveyancing solicitor will advise you to arrange insurance when you exchange contracts on your new property. Between exchange and completion you are obliged to proceed with the purchase. This would be the case even if the property were to be damaged before the completion date.
Do you need home insurance when you exchange contracts?
The first question to understand is what it means to exchange contracts in England and Wales.
What is Exchange of Contracts?
In England and Wales, exchanging contracts is the last but one step in a house purchase. Where completion is the final step in the process.
Under English & Welsh law exchange of contracts occurs after your solicitor has carried out all necessary searches. It’s after the mortgage has been arranged where necessary, the surveys are complete if required and there is agreement to the terms of the contract.
Once each party has signed the contracts and they have been exchanged between solicitors on either side, they are binding. For the exchange of contracts to be binding in law, there’s has to be whats referred to as ‘consideration‘.
Consideration in this case will be the ‘exchange deposit‘, which is generally 10% of the purchase price.
Up to the point when you exchange contracts, the house buying process is not legally binding in English and Welsh law. Prior to exchanging contracts, either a buyer or a seller can pull out of the process at any time.
But in England and Wales, once both parties have signed and exchanged contracts, it is extremely difficult for either party to back out of the agreement.
Do you currently have home insurance?
The second question to ask is, do you currently have home insurance on your present home? If you don’t, then you should. But also on your new home, you should insure on the day of exchange.
If you are worried about the risk of having to cover the cost of repairs if something were to go wrong, how are you going to pay for the damage. For example a house fire. Don’t rely on the fact that the sellers have insurance or will be around to repair the damage.
Who is responsible for house insurance between exchange and completion?
Who’s responsible for house insurance between exchange and completion isn’t as important as making sire you are covered. I’d rather have insurance in place after exchange and let the insurance companies work it out between them.
If you currently have home insurance, then you accept that insuring your home is important. Then so long as you also understand that once contracts have exchanged, you take legal responsibility for your new property. You should therefore make sure you arrange for home insurance on the day of exchange too.
Most solicitors advise that anyone purchasing a property should take out buildings insurance to cover themselves from the date of exchange. This is even if the sellers still have their own policy in place.
What insurance cover is needed after exchange of contracts?
You will need to take out an insurance policy that offers cover from the date of exchange on your new home. In order to be fully protected, you need a policy that covers at the very least the buildings.
However, you may also be advised to get insurance cover for contents too. This is because things like carpets and curtains tend to come under contents cover in the event of damage.
You need insurance to cover for things like fire, flood and storm damage. It’s possible that between exchange and completion something could happen.
Whilst the present owners are legally obliged to leave their home in good condition. If anything is damaged they are responsible for repairing it. But you are also responsible for the house, as you are ‘bound‘ to complete once you’ve exchanged contracts. You don’t want to be faced with damage you can’t afford.
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