A house is often the most important purchase decision for many people and it will also represent their largest monthly outlay. Therefore, it is sensible to protect your property in case anything happens that would impact your living or financial circumstances.
There are several different insurance products that you should consider when buying a new home. Each insurance product will cover a different element of your home and mortgage should the worst happen.
In this guide, we will answer the question ‘what insurance do I need when buying a house’ and explain the different types of insurance available to you as well as what each product covers.
This guide will cover:
- Buildings Insurance
- Contents Insurance
- Life Insurance
- Critical Illness Cover
What is buildings insurance?
Buildings insurance covers the cost of repairing damage to the structure of your home.
This includes permanent fixtures such as:
- Doors and windows
- Fitted kitchens
- Built-in cupboards and bathroom suites
Outside buildings such as garages and sheds are usually covered under this insurance, however it is best to check with your insurance provider before signing any documents.
Buildings insurance usually covers damage caused by:
- Fires and explosions
- Storms and floods
- Damaged pipes
- Theft and vandalism
- Fallen trees
- Vehicle collisions
Do you need buildings insurance?
Buildings insurance isn’t a legal requirement, but if you have a mortgage then it is likely to be a condition of the loan.
Even if you don’t have a mortgage, it is advisable to purchase this insurance. It will protect your property and will help to cover the rebuild costs if it were to become damaged or destroyed.
You will not need buildings insurance if you are renting a property. It is usually up to your landlord to ensure they have a policy.
What is contents insurance?
Contents insurance covers the cost of repairing or replacing your possessions that are destroyed or damaged in the event of a fire, flood or theft.
This includes anything in your home that can be moved, such as:
- Electrical appliances
Different policies offer different levels of cover. Some policies can cover for you if there is damage or a theft in the property when you are out and about. Other insurance policies can even account for spoilt food if there is an extended period of power loss that affects your freezer.
Before signing any insurance documentation, it is important to read the small print to see what will be included in the policy and what won’t.
What if I have single items of high value?
Many content insurance policies will have a limit on how much they will pay out on a single item. If the limit is lower than the price of your possession, then you may need to add the item to your content policy at an extra cost. You may also need to take out specialist cover.
Expensive purchases, such as laptops and jewellery, may not be covered if they were bought after your policy started so it is best to let your insurers known as soon as you have purchased this item.
Do you need contents insurance?
Unlike buildings insurance, your mortgage advisor will not insist on you having contents insurance.
However, it is advisable to take out this insurance to cover your possessions as, if damaged, it can cost a lot to replace these items, some of which may be essential.
What is life insurance?
Life insurance is a product that will allow you to leave money behind for your family and dependents when you die. The money can be paid as a lump sum or as regular payments and is designed to support your loved ones, helping to replace lost income or to pay off a large debt such as a mortgage.
There are a number of factors which will determine how much cover you need. These factors include your age, health, lifestyle and whether you are a smoker.
What is mortgage life insurance?
Mortgage life insurance covers the cost of mortgage repayments for your dependents in the event of your death. You can take out either decreasing or level term insurance.
- Decreasing term
This policy is designed specifically to help pay off debts that have decreasing values – such as a mortgage repayment. This will mean that your policy will cover your mortgage repayments if you pass away before paying the sum off.
- Level term
Level term policy will ensure that the pay out will remain the same regardless of when you pass away. This type of insurance can be helpful as it will provide your dependents with enough to cover the mortgage repayments and provide a little extra which can ease the financial burden.
Do you need life insurance?
Not everyone will need a life insurance policy.
However, if you have dependents, a partner who relies on your income or a family living in a house with a mortgage that you pay, then it is advisable to look into this cover to see which suits your situation.
Critical illness cover
What is critical illness cover?
If you are diagnosed with a critical illness, you may need to take an extended period of time off work which can have an impact on your finances.
That is where critical illness cover can help. Critical illness cover is an insurance policy that provides you with a lump sum of money if you are diagnosed with a certain illness or disability.
Not all conditions will be covered by this insurance, so it is advised to read the small print before taking out this policy.
Examples of illnesses that might be covered include:
- Heart attack
- Conditions such as multiple sclerosis
- Certain types and stages of cancers
Do you need critical illness cover?
Not everyone will need critical illness cover, however you might want to consider this cover if:
- You depend on your salary to support yourself and your family.
- You do not have enough savings to tide you over if you have to take an extended period of time off work.
- Your company doesn’t have an employee benefits package and so your job cannot cover you for a long period off work due to illness.