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Building Insurance – Is it a Legal Requirement?

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Whether you plan on purchasing a new building or already own an existing structure, building insurance is something that you can purchase. Many people get confused trying to understand whether or not they are required by law to have building insurance on their structure. The truth is that it’s a little bit more complicated than just a yes or no answer.

What Is Building Insurance?

Building insurance, defined as simply as possible, is a type of insurance policy for a structure. This type of insurance covers the walls, roof, floors, and fixed attachments to the structure in the event that damage occurs. There are many different causes of damage that will be specified in your policy. While each policy perils are different, here is a list of the most common events that will be covered:

  • Fire
  • Vandalism
  • Subsidence
  • Water Damage From Leaking Pipes
  • Vehicle Collision
  • Falling Trees
  • Adverse Weather Conditions

When Are You Required To Have Building Insurance?

Now, you should have a fairly clear idea of what building insurance is. This type of insurance is selective and not required by law. However, that doesn’t mean that you don’t have to have it. According to Money Expert, you’ll need to have building insurance if you fall into any one of these three different categories below.

  • You have a mortgage on your property. The lender is going to require that you have building insurance on the property until your mortgage is repaid. This is to protect their investment of funds.

  • If you own both a leasehold and a freehold, then you’re going to need to have insurance on the freehold. This holds true whether you own the freehold independently or if you’re a partial owner of the freehold with other tenants.

  • You rent out your non-owner occupied building to tenants. You’re required to have building insurance for the property as long as it isn’t your personal residence.

Factors To Consider When Purchasing A Building Insurance Policy

Hopefully, you have a good idea of whether or not you’ll need to have building insurance on your property. If you’ve figured out that you do or you simply want to have the coverage for your building, there are some factors that you’ll need to take into consideration. These will ensure that you get a policy that not only covers the monetary cost of rebuilding your property, but also a policy that fits all of your desired needs.

Know The Perils That Are Covered

You learned above the most common types of perils that are covered in most building insurance policies. However, every single policy is going to vary from the next. For this reason, it’s vital that you talk with your insurance agent about what perils will be covered. You don’t want to assume that flooding is covered and end up not having coverage if that situation occurs. You may find that with some policies, you’ll have to purchase additional coverage options, such as flood insurance, which will increase the cost of your monthly premium.

Know Your Coverage Limits

The most important part of any policy is having the right amount of coverage for the building that you have. Coverage is typically broken down into three different categories. These include the structure, contents, and liability. The structure is basically the cost of rebuilding the structure. The contents part of the policy is to cover the costs of the contents inside of the building. These are basically all the things that aren’t physically attached to your home, such as the appliances. Lastly, there is liability coverage that pays in the event that you’re held liable for someone else’s injury that happened on your property.

Understand Your Deductibles

Before your building insurance coverage is going to kick in, you’ll be responsible for paying a deductible. This is a set amount of money that is due to the insurance company before they will pay for the damages that occurred. As a general rule of thumb, the higher the deductible, the better your insurance policy will be. In contrast, the lower your deductible is, the less coverage your policy is likely to have.

 

Building insurance is something that you need to be aware of it you plan on purchasing a building in the future. While there are some legal requirements for building insurance, many of the requirements for having this type of policy come from the mortgage lender. By understanding what this type of insurance policy is and how it can benefit you, you can better determine what exact policy is right for your property.

 

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