Mortgages - Insurance checklist
There are many types of insurance you can take out with a mortgage – your broker or lender may try to sell you a range of policies. Some are a must to get the mortgage - others are not. Others may depend on your circumstances.
The FSA now regulates the sale of most types of general insurance products.
Which insurance do you need?
Buildings insurance
Everyone needs buildings insurance to cover their home in case the building is damaged or destroyed. While you have a mortgage, the lender will almost certainly insist that you have this cover.
Some lenders insist that you take out cover they arrange. This is called ‘tied’ insurance. Some insist you take insurance but don’t insist that you take their policy. This is called ‘compulsory’ insurance.
Many let you shop around for your own cover but charge an administration fee for checking the cover is enough. Some insurance providers will pay the fee for you.
Other lenders leave you free to choose your own insurance and do not make a charge.
Contents insurance
You will also probably want contents insurance to cover your furniture and possessions against loss or damage.
Insuring yourself and your mortgage
There are various types of insurance to pay off your mortgage or meet the monthly payments if something unexpected happens. Whether they are right for you depends on your personal circumstances - see
Different types of insurance
Is it right for you?
Where you have to take out the insurance as part of a mortgage deal it might not be the cheapest or best available, or it might not be right for you.
Don’t forget the premium can also increase in the time you have to keep it – you may find it difficult to cancel this policy later unless you repay the mortgage.
Watch out for these costs when considering a ‘tied’ deal. Remember there are plenty of good mortgage deals around that don’t make you buy insurance from the lender or broker.
It may be convenient to arrange insurance with your lender or mortgage broker but you don’t have to accept a mortgage deal with insurance tied in. It’s worth shopping around for insurance. You will often be able to save money compared with what’s on offer from the lender.
What are the fees and costs?
Insurance checklist
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