Can I use any buildings insurance provider, or does my lender choose?
You can use any buildings insurance provider you choose. Your mortgage lender cannot require you to use their own insurance product, and they cannot charge you a penalty for using a different insurer.
This is one of the most common misconceptions among first-time buyers, and clearing it up can save you a meaningful amount of money.
Where the confusion comes from
When you complete your mortgage application, your lender will almost certainly mention buildings insurance. They may offer you a policy directly, include it in a bundle with other products, or simply note that you are required to have cover in place from exchange.
This is where many buyers assume the lender's product is the required product. It is not. What the lender requires is that you have adequate buildings insurance in place, not that you use their specific insurer.
The distinction matters because lenders' insurance products are frequently not the most competitive available. Like any captive market (airport food, hotel minibars, train-platform coffee), insurance sold at the point of mortgage application does not always benefit from the competitive pressure that makes the broader market efficient.
Shopping around typically finds you equivalent or better cover for less money.
What the regulations say
The Financial Conduct Authority regulates mortgage lending and related products, including insurance sold alongside mortgages. The rules are clear: lenders cannot make the granting of a mortgage conditional on the borrower purchasing any insurance product from them.
They can offer their own product, and they can tell you what their requirements for third-party policies are: most will have a minimum level of cover that any policy must meet. But they cannot insist you use their insurer.
If a lender implies or states otherwise, this is incorrect and you are entitled to push back.
The rule in a nutshell
Lenders can set minimum standards for your policy and offer their own product.
Lenders cannot require you to use their insurer, or penalise you for choosing someone else.
What lenders can require
While lenders cannot dictate who you use, they can set standards that any buildings insurance policy must meet. These typically include:
- The sum insured must reflect the full rebuild value of the property. The lender needs to know that in the event of total destruction, there is enough insurance to cover the cost of rebuilding, protecting their security.
- The policy must cover standard perils. Fire, flooding, subsidence, storm damage, escape of water, and similar events are standard expectations.
- The lender must be noted as an interested party on the policy. Most lenders ask to be added to the policy as an interested party, which means they are informed of any significant changes or cancellations and would be involved in the event of a major claim that affects their security. This is a straightforward request that any reputable insurer will accommodate.
Meeting these requirements is not difficult. Any standard buildings insurance policy from a reputable provider will typically satisfy them without modification.
How to demonstrate you have cover in place
When you arrange buildings insurance independently, your lender will ask you to provide confirmation of the policy. This usually means sharing your policy number, the name of the insurer, and the start date of the policy. Some lenders ask for a copy of the policy schedule.
Provide this information through your solicitor or directly to the lender as required. It is a routine administrative step and takes very little time.
Why using an independent adviser helps here too
A whole of market mortgage adviser typically has access to insurance comparison tools and relationships with insurers that can help you find the most appropriate cover at a competitive price. They can also make sure that the policy you choose meets your lender's specific requirements, so you are not arranging cover only to discover it does not satisfy a condition of your mortgage.
This is not the primary reason to work with an adviser, but it is another area where their knowledge of the market adds practical value.
The short version
You are free to choose any buildings insurance provider whose policy meets your lender's minimum requirements. Lenders cannot require you to use their own product, and doing so would be a breach of FCA rules.
Shop around. Use a comparison site, speak to an independent adviser, or go directly to insurers. The difference in price between providers for equivalent cover can be significant, and there is no good reason to pay more than you need to for a product you are required to have.
This article is for informational purposes only and does not constitute financial or insurance advice. Always speak to a qualified adviser before making decisions about protection or insurance products.