Who is Responsible for House Insurance Between Exchange and Completion?

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Who is Responsible for House Insurance Between Exchange and Completion?
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When a house is sold, there is a period between the exchange of contracts and the sale completion. 

During this time, ensuring the property has adequate insurance is essential. 

However, whether the seller or buyer is responsible for this can depend on several factors.

In this blog, we’ll examine the time between exchange and completion and who is responsible for insuring the property. 

What is house insurance?

House insurance is a policy to protect a home’s physical structure

(It is sometimes referred to as building insurance, but building insurance is a type of home insurance.)

It offers financial protection for the property’s walls, roof, windows, and other permanent fixtures. And pays out if any of these are damaged.

A house insurance policy will typically cover the cost of any necessary repairs if the house sustains damage through theft, fire, flooding, or other events.

How long might there be between exchange and completion?

The exchange of contracts is when the two solicitors representing the seller and buyer exchange signed contracts

The buyer will pay their deposit on this date, and the agreement to buy or sell the property becomes legally binding.

The buyer’s deposit and mortgage are transferred to the seller on completion. 

The money is electronically transferred between the solicitors. Once the transfer is complete, the buyer can collect the keys to their new property and move in.

The gap between exchange and completion can vary depending on several potential factors. 

The complexity of the sale and the speed at which all parties involved can complete the necessary steps will both have a role to play.

On average, most buyers and sellers wait around two to four weeks for completion after the contract exchange is carried out.

Who is responsible for house insurance between exchange and completion?

The contract between the buyer and seller will determine who is responsible for insuring the property between the exchange and completion dates.

In most cases, the buyer will be responsible for getting adequate insurance coverage for their new property from the exchange date onwards. 

However, there are some exceptions, including: 

  • When the contract of sale has been specifically amended to make the seller responsible for insuring the property
  • When the seller is obliged to maintain the insurance. For example, if they have a tenancy or leasehold agreement, or another separate contract.

Important notes on house insurance between exchange and completion

Whether you’re selling or buying a property, there are a few key things to remember regarding house insurance.

Ensure you understand the contract terms regarding insuring the property between the exchange and completion dates. 

The contract should provide clear guidelines on who will ensure the property during this time.

If you are buying the property and are responsible for getting house insurance between exchange and completion, double-check exactly when a policy comes into effect.

If you plan to move into the property on the completion date, consider getting a policy that covers both the building and its contents. 

A combined building and contents policy will protect your personal belongings once you move in.

You should also check with the insurance company to see if the policy contains any exclusions or restrictions that may impact coverage between exchange and completion.

If you are buying a property

You should know that you cannot rely on the seller’s insurance policy between exchange and completion unless the seller is obligated to insure the property.

The reasons for this are as follows:

  • The seller may decide to cancel their policy upon the exchange of contracts.
  • The seller may not have insured the property at all, as there is no legal obligation for home insurance.
  • The seller may have unintentionally under-insured the property.
  • The seller may have needed to adhere to the conditions of their insurance policy, leading to invalid coverage.
  • For example, the seller may only have a valid insurance policy if they have updated it with the correct information or made a mistake when taking the policy out.

If you are selling a property

Although the obligation to insure the property is passed to your buyer on the exchange date, relying on their policy is unwise.

Sellers should keep their home insurance policy valid until the completion date

This provides cover should the buyer fail to take out an insurance policy on the house. 

It ensures that the property is covered until you no longer have a legal interest in it, and any level of risk is eliminated.

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