When using a mortgage to buy your new home, some forms of insurance can be essential. We look at which ones are, and why.
What insurance do you need when buying a house?
Although not a legal requirement, most mortgage lenders require borrowers to have a buildings insurance policy in place before the mortgage completes.
Building insurance covers your property against damage from most natural disasters, such as lightning, explosions, water damage, and in some cases earthquakes and hurricanes. Criminal damage, such as vandalism, theft and arson is typically also covered.
The cost of buildings insurance premiums vary depending on the size and age of the property, location and hazard risk, as well as the size of your policy excess, but an average annual cost is around £262.
When do you need to get buildings insurance?
Usually the policy will need to be in place before contracts are exchanged, so it’s a good idea to look at insurance quotes when considering your mortgage.
Many mortgage brokers will be able to recommend an insurance provider or provide you with no-obligation quotations for this type of policy when assessing your mortgage needs.
What other types of insurance can you consider?
The following non-essential insurance policies can be very beneficial to mortgage holders, and may be more or less relevant to you depending on your individual circumstances and needs. Speak to a broker with experience of home insurance policies for further advice.
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Insurance type |
Covers |
Approximate cost |
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Contents insurance is often sold as a package with buildings insurance. However, mortgage lenders will not require you to have contents insurance to approve a mortgage |
Possessions inside your home against theft and damages caused by many of the same factors covered in a buildings policy. |
Monthly costs vary depending on the level of cover but average costs are around £124 per year. If you add on accidental damage cover, or extra on particularly valuable items it’s likely to cost more. Contents insurance may be cheaper when combined with a buildings insurance policy, although this is not always the case |
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Life insurance is not mandatory for mortgage approval, but it can be a good idea for those buying a home they will be sharing with family |
Some or all of your mortgage repayments (depending on the policy) should you die while repaying the mortgage |
Life insurance costs can vary dramatically depending on a range of factors, from the type of policy through to your age and health. However, when comparing life insurance vs mortgage protection, it’s usually the more costly of the two |
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Mortgage protection insurance (MPPI) is a type of income protection insurance that helps you repay your mortgage if you become unable to |
This usually covers your income if you lose your job or cannot work due to an illness or injury. |
Mortgage insurance is generally much more affordable than life insurance, however, it only covers your mortgage repayments or a percentage of your salary for a set period, whereas life insurance would repay your entire loan |
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Critical illness cover pays a lump sum when you're diagnosed with a critical illness. It’s not specific to those buying a property, but can help with mortgage costs if you become critically ill |
Payment for severe and long-term illnesses such as cancer and Multiple Sclerosis while you are still alive |
Critical illness cover is also typically cheaper than life insurance |
You can read more about all of the home insurance products mentioned above in our detailed guide to home insurance.
What if you are renting out your property?
If you are renting out your property you may also want to consider landlords insurance. This is similar to home insurance, but for those with buy-to-let properties. It usually covers both the building and the contents owned by the landlord, but can also provide payouts for loss of rent and legal costs, if you have troublesome tenants.
Get a quote
Understanding your risk exposure, the insurance products available and which ones are right for you can be a challenge - especially as a first-time buyer.
Working with an insurance expert ensures that your coverage is specifically tailored to your needs while remaining cost-effective.
There are insurance alternatives and safeguards accessible, and our experts can help you choose the right coverage for you and your family based on your specific needs.
Get in touch for a quote now!
FAQs
Yes, typically, the responsibility for insuring the property rests on the buyer's shoulders, so you will need to arrange suitable buildings insurance as a minimum before contracts are exchanged. This is usually the responsibility of the buyer.
What's important here is that a new policy is in place before contracts are exchanged. This is when you are legally obliged to purchase the property, and it's typically when responsibility for insurance passes over to the new buyer.