Threshold Mortgage Advice

Do you need property insurance if you buy a new build property?

Buying a new build property for your first home? Good move – newly built properties can be more environmentally friendly and because they’re built to a high spec, can be cheaper to insure too.

But why do mortgage lenders insist that buyers take out insurance, especially since most New Builds come with a 10-year-warranty?

What’s the difference between New Build insurance and a warranty?

New Build houses and flats often come with a 10-year warranty which provides protection for any unexpected problems with the structure of the building. These could include:

  • Major structural damage
  • Defective waterproofing
  • Faulty drainage

Some developers also include an additional warranty known as “defects warranty” for the first two years to cover for:

  • Damage to the paintwork
  • Heating problems
  • Plumbing
  • Doors and trim
  • Electrical systems

If you have a warranty, why do you need home insurance?

New Builds are built to a high specification and this can help to reduce the risk of any unexpected damage. With that and a warranty included in the majority of housing developer agreements, is there any need for insurance?

The answer is of course, yes. Although a warranty can cover your new home from range of unexpected damages, it won’t cover you for all eventualities. There are also a range of insurance products, each designed to cover either you, your property or your family for a number of possible incidents.

Do you have to have insurance in place to get a mortgage?

The only insurance you legally need when getting a mortgage is buildings insurance and the good news is that some developers also include this as an incentive.
That being said, that’s not always the case and chances are, your lender will require you to have it.

They’ll want to feel reassured that in the event that your building is damaged, you can afford to keep up with your mortgage and pay out for any repairs.

It may sound morbid but lenders can also require you to have life insurance in place too. If you were to die, the money they loaned you for your mortgage would need to be repaid and having a policy in place can resolve that issue, leaving your spouse or family without the burden of repaying it.

What types of insurance might I need when buying a New Build?

Whether you’re buying a New Build or an older property, you may benefit from having:

Buildings insurance

This covers the cost of repairing or rebuilding the main structure of your property. It usually includes the roof, walls and windows as well as fixed items like fitted kitchens, bathrooms and toilets.

As a rule of thumb, it should cover the cost of rebuilding your home from the ground up. If your policy allows, you may be covered for garages, driveways and walls/fences.

Ask an adviser about the developing partners we work with and the property insurance incentives they may offer.

Contents Insurance

This covers removable belongings if they are damaged, destroyed or stolen. This generally includes protection for:

  • Furniture such as sofas, beds, dining tables, chairs etc
  • Antiques and ornaments
  • Personal items such as clothing and jewellery
  • Electrical items like TV’s, sound systems, computers etc
  • Kitchenware such as cookware, microwaves, food processors etc
  • Entertainment items such as toys, video games, DVDs etc

Different contents insurance providers offer various levels of cover, so always thoroughly check your agreement. If you feel unsure about signing, ask an expert to read through it and raise any of your concerns with the provider.

Life insurance

Life insurance cover is essentially an agreement between you and an insurance provider that if you pay regular premiums, they will pay out a lump sum in the event of your death.As with any protection policies, there will be terms and conditions and the level of cover you buy can affect the size of your beneficiaries payout.

The money from a life insurance policy can usually be spent as the beneficiary(ies) see fit, whether that be to pay for a mortgage, household bills or funeral costs.

Is property insurance cheaper for a New Build?

The amount you pay for property insurance on a New Builds can often be cheaper than insurance for an older property because they are usually built with the latest, most secure doors and windows.

As well as being a nightmare for burglars, being recently fitted can also make them less likely to break and need replacing.

Other factors can also affect your property insurance such as the proximity to water, the crime rate in the area and the level of cover you opt for.

Ask us about New Build insurance

If you’re thinking of buying a New Build and you’d like to know which insurance products you might need or how much it might cost, ask an adviser.

Our team can also be contacted by online contact form or by booking an appointment, so feel free to send our experts your questions about either the mortgage process or insurance.

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