You have purchased your first home and are finally on the property ladder.
But do you know which types of insurance are mandatory and which are optional?
Let’s run through the key insurance policies to consider…
Contrary to popular belief, generally speaking, it is not compulsory to take out life insurance if you have a mortgage. Although, on occasions it can be a stipulation of the lender.
That said, taking out life cover is usually a very good idea, especially if you have children and/or a spouse who rely on you financially.
The pay out from a life insurance policy could clear the mortgage if you were no longer around. Allowing your loved ones to remain in the family home and not have to worry about making the monthly repayments.
The most common forms of life insurance are decreasing term and level term cover.
Decreasing term cover, sometimes called mortgage life insurance, offers a declining pay out amount as the policy ages. This option is ideal for covering a repayment mortgage, as the amount you owe decreases, so does the cover amount. This is the cheapest form of cover.
In contrast, level term cover offers a fixed pay out amount throughout the term of the policy. So, whether a claim is made 1 year or 19 years into a 20-year term the pay out is the same.
Both these options are term based, so a claim can only be made if the policyholder passes away during the set time frame of the policy.
You can compare quotes for free with Reassured, an award-winning Havant based life insurance broker.
Mortgage payment protection insurance (MPPI)
An alternative to life insurance in order to protect your mortgage, is mortgage payment protection (MPPI).
MPPI is an insurance policy that covers you if you’re unable to work/pay the mortgage because of an accident, illness or unemployment.
Often your mortgage lender will request that you secure buildings insurance before they agree to release the funds to allow you to purchase your property.
Even if it is not mandatory from the mortgage lender, it makes sense to protect what is for most our most valuable asset.
Buildings insurance protects you against any damage to the structure of your home from things like flooding or fire damage.
If you buy a flat the buildings insurance is often covered within the cost of your monthly or annual management fee.
Contents insurance protects the personal possessions within your home from damage or theft. Again, it is not mandatory but usually a very good idea.
In order to secure the necessary level of cover, think about the value of your key belongings; bikes, laptops, jewellery etc.
If you have a specific item or items which are of high value, it is recommended to make this clear to your insurer.
We hope this article has helped you understand how best to protect your new home.
When the time comes for home improvements and adding value to your property, why not get a quote from Smart Home Improvement People?