Before you take on a mortgage, it’s important to be confident that you can meet the payments.  Having peace of mind is important, so arranging insurance is often a good idea.

There are many types of insurance available.  But when it comes to buying a property it can be important to get the right insurance in place for your peace of mind. An independent financial adviser (IFA) can explain the benefits of all insurance types, including the ones listed here:

Building and contents insurance

Your mortgage lender will insist on the building being insured for a minimum amount of money, usually the sum it would cost to rebuild the property.  In addition to this, most people would agree that it’s common sense to have insurance in place for your personal possessions and contents.  If you add up what it would cost to actually replace all the items in your home today, you may be surprised at how much money you’d need.  Many people under insure their personal possessions and contents and although devastating events like fires and floods are rare, you want to make sure you can recover quickly if they happen to you – but if you under insure you will only be offered a proportion of the total value of what was lost.

Most insurance companies offer discounts on their insurance depending on the type of security you have in your home.  It’s always a good idea to shop around.  Often, the cost of taking additional precautions – such as installing an alarm – can be offset very quickly by the amount you’ll save by bringing down your insurance premiums.  Your whole-of-market mortgage adviser or IFA can arrange building and contents insurance for you, at the same time that you take out a mortgage.

Mortgage payment protection insurance

You may like to consider taking out a policy that helps you cover mortgage payments under certain circumstances where your income may be reduced – such as unexpected illness.  A mortgage adviser or IFA can give you information about the benefits of having mortgage protection in place, and how a policy will or will not contribute to the cost of a mortgage if you’re unable to make the payments under a variety of different circumstances.

Life insurance

No one likes to think about dying prematurely, but it does make sense to put plans in place to help your loved ones if the unexpected happens.  With the right amount of life insurance in place, there’s no need to worry about how any outstanding mortgage debts would be paid off by those you leave behind – which is why most IFAs and mortgage brokers will suggest taking out a policy, when they’re arranging your mortgage.  Many mortgage lenders insist you take out life assurance to cover the claim.

In terms of addressing mortgage debt, should the worst happen, most borrowers are encouraged to consider a decreasing term assurance policy as a bare minimum.  With this type of policy, the sum to be paid in the event of death will reduce by a fixed amount each year, reflecting the balance of your mortgage.  Premiums are usually fixed in advance.  Your mortgage adviser or IFA will give you details of this, and other types of life insurance depending on your financial circumstances.

Questions you might like to ask your mortgage broker and IFA…

Which types of insurance will my lender insist on?

Will I get a discount by taking my lender’s insurance policy?

What types of insurance could benefit my family if anything happened to me?

Which policies could help me meet my responsibilities if I’m unexpectedly taken ill?