Home insurance when you buy: what the lender needs and what to check

What home insurance covers

A home insurance policy has two parts, and you can buy one or both:

• Buildings cover pays to repair or rebuild the home after damage: fire, storm, flood, subsidence, burst pipes, a car through the wall. It covers the structure, the fitted kitchen and bathrooms, and usually the garden walls, sheds and drives.
• Contents cover pays for what is inside: furniture, clothes, electronics, bikes. Some policies add accidental damage, cover for items outside the home, and bicycle cover.

Most policies also include public liability: if a slate falls on a passer-by, or a visitor is hurt in your home, the policy covers the claim against you. And alternative accommodation: somewhere to live while the home is repaired after a claim.

What it does not cover: wear and tear, damp that built up over years, a home left empty for more than a set number of days (often 30 or 60; check), and flood in some areas where the insurer will not take the risk. Read the exclusions before you buy, not after a claim.

It is a separate policy from mortgage protection, which is life cover, and from the structural warranty on a new build.

When you need it

The lender needs buildings cover from the day you sign the contract, because from then you are bound to buy, and the risk of the building passes to you under the standard contract conditions. The loan offer makes it a condition: the policy must cover the rebuild cost, be in your name, and note the lender's interest.

Your solicitor sends the policy schedule to the lender before drawdown, with the protection policy. No schedule, no money.

So the order is:

1. get quotes once you have the loan offer, when you know the home and the rebuild cost
2. buy the policy with the start date set for the day you sign contracts
3. send the schedule to your solicitor

If you are buying an apartment, the management company insures the block and you pay for it in the service charge. The lender needs a copy of the block policy, which your solicitor gets from the seller's solicitor. You still want contents cover of your own.

On a self-build, the lender wants cover from the first drawdown, often as a self-build or site policy that becomes a home policy at completion.

The rebuild cost, not the price

The amount to insure the building for is what it would cost to rebuild, not what you paid. The two are different: the price includes the site, and the site does not burn down. In a city the rebuild cost is usually well below the price; in a rural area it can be above it.

The Society of Chartered Surveyors Ireland publishes a rebuild cost calculator by region and house type, updated each year. Most insurers accept it, and some lenders' valuers put a rebuild figure on the valuation report. Use one of those, and update it every year or two: building costs rise, and a home insured for too little is paid out in proportion (called average).

For contents, walk through the home room by room and add up what it would cost to replace everything new. People undercount by a lot. The policy pays what you insured for, not what you lost.

What it costs

Home insurance for a typical house costs €300 to €600 a year for buildings and contents together. The price depends on:

• the rebuild cost and the contents sum
• the area, and whether it has flooded or has a high claims record
• the age and construction of the home, and whether it is thatched or timber framed
• the excess you choose (the part of a claim you pay yourself)
• the alarm, the locks, and whether the home is lived in all year
• your claims history

There is a government levy on every policy, which the insurer adds to the premium.

Get quotes at every renewal, not just the first year: the premium a new customer is offered is often below the renewal figure for the same cover. The table below gives the typical first-year range from our costs config, not a quote.

How to choose

Compare at least three quotes on the same rebuild cost, the same contents sum and the same excess. Then check:

• the exclusions: flood, subsidence, an empty home, escape of water
• the unoccupancy clause: how many days the home can be empty
• whether accidental damage is included or an extra
• the excess on each type of claim; subsidence often carries a much higher one
• the limit on any single valuable item
• whether the policy notes the lender's interest without a fee

Who sells it: insurers directly, brokers, and your lender or mortgage broker. All of them must be on the Central Bank's register. A broker can compare several insurers; some charge a fee, which must be in writing.

Your lender will offer its own policy with the loan. You do not have to take it: the Consumer Protection Code says the loan cannot depend on it. Many people find the same cover for less elsewhere.

Where to find cover

MortgageWise does not pass your details to an insurer. This page gives you what you need to choose for yourself:

1. the Central Bank's register at registers.centralbank.ie, where you check that any insurer or broker is regulated
2. the CCPC's page on home insurance, which explains the cover in the regulator's own words
3. our mortgage rates comparison at /compare/mortgage-rates, because the lender you choose sets the conditions in the loan offer, including the insurance it asks for

If you use a mortgage broker, they can usually quote home insurance too. Ask for it as a separate decision from the mortgage, with the premium in writing.