If an individual takes out buildings insurance before purchasing a house, but the sale falls through, what happens to the premium?

The scenario highlights the principles of risk and coverage in insurance, particularly in the context where a policy is taken out but no insurable interest materializes due to the sale falling through. When an individual takes out a buildings insurance policy, it is done with the expectation that there is an insurable interest in the property. If the sale does not proceed, the individual no longer has an insurable interest in the house.

Under these circumstances, most insurers will have a policy in place that allows for a full refund of the premium since the primary condition for coverage (ownership of the property) has not been satisfied. Insurers typically do not withhold premiums in scenarios where no coverage has been provided because there’s no risk assumed by the insurer. Furthermore, the insured cannot claim a partial refund as there is nothing to insure, and the policy would not remain active when there’s no property ownership involved. Therefore, the correct understanding is that the premium is returned in full to the insured due to the absence of insurable interest upon the sale's failure.