Buying a property at auction is a fast-paced and exciting way to secure a home or investment, but it also comes with unique responsibilities—especially when it comes to insurance. One of the most important (and often misunderstood) aspects of buying via unconditional auction is knowing exactly when to arrange buildings and contents insurance.
What Is an Unconditional Auction Sale?
An unconditional auction means that the exchange of contracts happens immediately at the fall of the gavel (or upon online bidding ending). At that very moment, the winning bidder is legally bound to complete the purchase—usually within 20 working days.
Unlike traditional private treaty sales where there’s a delay between offer acceptance and exchange, in an unconditional auction there is no grace period. Exchange is instant, and the buyer is committed.
When Does the Risk Transfer?
In most property purchases, including auctions, the risk of damage or destruction to the property typically passes to the buyer on exchange of contracts—not on completion.
Because in an unconditional auction exchange happens at the fall of the hammer, this means that the buyer becomes responsible for insuring the property immediately from that moment.
Why Buildings Insurance Matters
Imagine you win an auction lot on a Thursday and the property is damaged by fire or flood before completion 20 days later. If you haven’t arranged buildings insurance and the contract doesn’t include seller obligations for insuring post-exchange, you could still be legally required to complete the purchase and bear the loss.
To avoid this risk, it’s essential that buyers put in place buildings insurance as soon as they win the lot.
Many experienced auction buyers will even pre-arrange an insurance policy to begin on the day of the auction, pending the outcome.
What About Contents Insurance?
Contents insurance is generally only relevant if you are:
- Buying a furnished property
- Taking ownership of landlord fixtures or fittings
- Planning to occupy immediately
If you’re not moving in straight away or the property is vacant, contents insurance may not be necessary immediately, but should be arranged before moving furniture, appliances, or personal effects into the property.
Landlords intending to let the property immediately may also wish to insure fixtures and contents against theft or damage from the day of completion.
Key Takeaways
- Exchange of contracts = legal commitment = risk transfer
- In unconditional auction sales, this happens the moment bidding ends and you win the lot
- Buildings insurance should be arranged to start on auction day, not on completion day
- Review the auction legal pack and contract to confirm risk provisions
- Pre-arrange cover or speak with a specialist auction insurer for tailored policies
Final Tip
Always read the Special Conditions of Sale in the legal pack carefully. While the standard position is that risk passes on exchange, there may be clauses that vary this, especially for new builds or leasehold properties. When in doubt, consult your solicitor—and never leave insurance to chance.