Unfortunately the answer to this is yes, albeit through no real fault of their own.
Homebuyers have to provide evidence of adequate buildings insurance on their new property to allow the mortgage lender to release funds, and this evidence is usually required to allow exchange of contracts to happen.
Whilst sellers will usually maintain buildings insurance on the property until completion, standard conditions of sale dictate that the buyer can be forced to complete the purchase even if the property has been damaged after the exchange of contracts. There is no legal obligation on the seller’s insurers to pay for the damage. To cover this possibility, most mortgage brokers therefore arrange cover for the homebuyer with effect from the date of exchange.
What is not common knowledge however, is that whilst most insurers have some means of providing this cover, for the most part, brokers need to actually take specific action to trigger it, and insurers will only provide cover if asked.
This is a big concern, as if insurance providers are not always making it unmissably clear to advisers that they need to take specific action to trigger this additional layer of cover, then those advisers could unwittingly place both themselves and their clients at risk. It must not be assumed that the insurer will automatically provide this cover.
We providers have an obligation to ensure that advisers are aware of this, and on the Berkeley Alexander online Quote and Buy system we ask specific questions about it. If your current provider does not specifically and clearly deal with the issue then you need to talk to them today. I would urge all advisers to take positive action to “Mind The Gap” when it comes to buildings cover between exchange and completion. Not doing so could be disastrous for all concerned.
Mark Hutchings, sales and marketing director at Berkeley Alexander
