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What insurance do I need if I get a mortgage?

Insurance Questions Answered: 

I’ve had an offer accepted on a house and my mortgage approved – what insurance do I need to buy the property?

Your house is likely to be your most expensive asset, so it’s essential that you give yourself a vital safety net should something happen to you or to your home.

Though Buildings insurance is not a legal requirement, having appropriate buildings insurance in place is usually a condition of your mortgage. You should ensure that there is a policy in place for when you exchange contracts, so shop around to find the right policy for you. Remember, with all policies, look at what’s covered as well as the price.

Lenders will ask you to have buildings insurance as it protects you and them against the cost of repairing or rebuilding your home should it get damaged.

It covers:

  • the structure of your home (the roof, walls and windows)
  • any permanent fixtures and fittings such as fitted kitchen units and bathroom suites

Find out more about building insurance here.

Do I need buildings insurance if I am purchasing a leasehold property and someone else owns the freehold?

Many leasehold property owners are not responsible for purchasing buildings cover (it’s often purchased by the freeholder and recovered through a service charge). However this is not always the case, so we would advise that you check with the freeholder and the details within your lease which should specify who is responsible for insuring the building. 

How much should I insure my new home for?

Buildings insurance ‘sums insured’ should be related to the cost of rebuilding your property again should the worst happen, rather than the market price or cost you purchased your new home for.  You can calculate your rebuild cost here.

Contents insurance

Buildings insurance only protects the actual building structure, so once you’ve moved into your new home you might want to consider taking out contents insurance to help protect your belongings too.

Contents insurance will cover the cost of repairing or replacing your possessions that are damaged or destroyed in the event of a fire, flooding or theft. Some policies can even cover you for damage or theft to property when you’re out and about. Find out more about buying contents insurance here.

Other types of insurance to consider if you get a mortgage:

Life insurance is not legally required when buying a property, but it will cover your mortgage cost should you die before you pay it off. While this might not be too much of a concern if you are living alone, it might be something you want to consider if you have a family, particularly if you are the main earner.

Find out more about life insurance here.

Critical illness cover will provide you with lump sum payment if you get diagnosed with a serious condition specified in your insurance policy. All Critical Illness policies provide cover for three core conditions, namely, cancer, stroke or a heart attack, but many insurers offer cover for other conditions as well. The lump sum could be used to pay off your mortgage or to ensure that you can still make the payments while you recover.

Find out more about critical illness insurance here.

Income protection will pay you a tax free monthly income if you are unable to work due to injury or illness, or if you suffer a reduction in salary (e.g. if you’ve been made redundant). Policies are available that can last for a year or up to your retirement date.

These payments can help cover the cost or your mortgage should you find yourself unable to work. This sort of cover might be especially useful for self-employed homeowners.

Find out more about income protection policies here, and insurance for self-employed workers here.

Last updated 16/10/2018