5 types of insurance you need when taking out a mortgage

Whether you are a first-time buyer or an experienced property buyer, understanding the insurance that you need to take out when starting with a mortgage can be a minefield.

In this guide, we break down the 5 main insurance policies you need when taking out a mortgage.

Buildings Insurance

In much the same way that it is a legal requirement to insure your car, you can’t have a mortgage without insuring the building you’re borrowing money against. Buildings insurance will need to cover the cost of the property being rebuilt if it is damaged or destroyed. The insurance will also protect things like garages, sheds and fences as well as pipes, cables and drains.

Contents Insurance

While this is an optional insurance when taking out a mortgage, it is one that we recommend you consider. Imagine if you picked your house up, turned it upside down and shook it around – everything that falls out is what your contents insurance would cover. Sofas, appliances, clothes, cushions, lamps, computers and more. It’s important to get the total contents sum insured as this is the maximum your insurance provider will pay out if you claim. You should reassess your contents cover after you have made large purchases or bought and received expensive gifts on birthdays or Christmas. Most content insurance will cover the cost of replacing or repairing possessions that are damaged or destroyed as a result of an insured event such as flooding, fire or theft. You can consider optional insurance extensions that will cover accidental damage, cover away from home and more.

Income Protection

Whether you are unable to work due to illness or injury, income protection insurance does exactly that – it protects your income to allow you to maintain your lifestyle when unable to work, typically until you are due to retire so for the whole of your working life. No need to worry about mortgage payments and bills; talk to your mortgage adviser now to find out how much you could receive and for how long.

Critical Illness Cover

Critical illness cover can either be taken out by itself or bought as part of a package with life insurance.

Unlike income protection insurance, critical illness cover pays out a lump sum when you meet one of the listed definitions. Critical illness cover is there to help to support you and pays off your mortgage so that you don’t need to worry about losing your property while dealing with your diagnosis, treatment and prognosis.

Life Insurance

In the unfortunate event of your death, life insurance makes sure that your family have a safety net to fall back on by paying out a lump sum to pay off the mortgage, so you don’t leave them with large amounts of debt. After deciding on the amount of money that your family would need to survive should you die, your adviser will help you to find the best deal.

In most instances, the life insurance will run for the term of the mortgage, although some people take out life insurance just until their children are financially independent.

It all sounds a little complicated…

With a good mortgage adviser or broker, the insurance you need when taking on a mortgage need not be complicated.

At Visionary Finance, we can help to walk you through the mortgage maze and ensure that you have all relevant insurances in place for safety and peace of mind in your new home.