Insuring Your Property on Exchange

Another question I am often asked....

Why do I need to insure my property on the exchange of contracts instead of the date of completion? Good question.

It can be a common misconception with buyers of property that a Conveyancer actually acts for the mortgage lender as well as them.

Whilst I will always hold my clients best interests when purchasing a property this will also be the same for the lender, so in effect, a Conveyancer is actually acting for two parties during your transaction, the buyer and the lender.

When I come to a point whereby I hold a signed contract, transfer, mortgage deed and the deposit funds, this is the point that I will ask my clients to put in place and at “risk” the buildings insurance which can confuse my client.

It must be noted that if you are having a mortgage you must have in place your buildings insurance from exchange of contracts. This is vital because in between exchange and completion, nothing is covering you for an event such as a fire, burglary or other.

Once the exchange has taken place the sellers’ insurance would not cover you or the lender. For example, if a fire at your property was to break out in between exchange and completion, you as the buyer could pull out but you would lose your 10% deposit which is provided upon exchange of the contract, or if you carried on to completion you would be left with the aftermath of the fire.

This is the specific reason why your Conveyancer will ask you for insurance on the exchange of contracts as it will be a condition of your mortgage offer that this is in place. If insurance is not in place you would already be in breach of your mortgage conditions, and would not be a good start to your relationship with your lender.