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What insurance is mandatory when buying a house?
Before we answer the question "What insurance do you need when buying a house?" we must first specify what types of insurance fall under the umbrella term "house insurance".
The most basic form of home protection is usually referred to as Buildings and/or Contents Insurance. In some cases, these two coverages are offered together in a single product.
The main types of insurance policies that may be available to you are:
Buildings insurance - Building insurance covers all of your home against damage from most disasters, including fire, lightning and explosions, as well as vandalism, theft and water damage due to burst pipes or other problems in your home.
In some instances, this type of policy even covers damage from events such as earthquakes and hurricanes.
Contents insurance - Contents insurance usually only protects the possessions inside your home against damage due to fire, lightning and other perils mentioned in the building policy. (Ordinarily, such coverage does not extend to such concerns as floods or earthquakes.) The exception is when you carry separate flood insurance.
In that case, there is usually a rider attached to your contents coverage that provides you with the necessary protection.
In order to make sure that you have adequate protection, it's a good idea to be familiar with the types of perils that are typically covered under these policies.
These basic coverages can also be modified in a number of ways to suit your specific needs, such as adding increased coverage for valuable items or raising the amount of money that you would receive following a covered loss.
Some homeowners find that they may need additional forms of protection when buying a house which is why many choose to go for more than just house insurance.
Do I need to insure a house before completion?
Yes, as the buyer, you will need to arrange suitable buildings insurance before contracts are exchanged, and this is usually the responsibility of the buyer.
You should ask your insurance broker to provide a no-obligation quotation for standard buildings and contents cover, which you can then choose whether or not to accept. What's important here is that a new policy is in place before contracts are exchanged.
What does buildings insurance cover?
Buildings insurance covers your home against damage from most disasters, including fire, theft and water damage due to burst pipes or other problems in your home.
It also provides cover for the cost of repairs to your home (including the cost of temporary accommodation if necessary) or rebuilding, up to the limit of your policy excess.
Your insurer will usually pay you money to repair your home, or, if the damage is such that it cannot be restored, may cover the full rebuild costs.
How much does buildings insurance cost?
Buildings insurance premiums vary depending on the size and age of the property, location and hazard risk.
The age of a building is of particular importance, as older properties are more likely to suffer from problems such as subsidence and crumbling masonry.
If your property is of non-standard construction, such as concrete or steel-framed houses, or is a Grade I or Grade II listed building, getting insurance cover can be expensive.
Do I need house insurance when I exchange contracts?
Yes, typically, the responsibility for insuring the property rests on the buyer's shoulders, so you will need to arrange suitable buildings insurance as a minimum before contracts are exchanged. This is usually the responsibility of the buyer.
What's important here is that a new policy is in place before contracts are exchanged. This is when you are legally obliged to purchase the property, and it's typically when responsibility for insurance passes over to the new buyer.
Do I need home insurance for a mortgage?
Although not a legal requirement, most mortgage lenders generally require borrowers to have at least a buildings insurance policy in place.
If you have a mortgage, buildings insurance is typically a condition of your mortgage terms and failing to get a policy in place can put your mortgage in jeopardy.
This means when you buy a house, you will need to arrange suitable buildings insurance before contracts are exchanged.
For contents insurance, this is something that you may consider but is not a requirement from mortgage lenders.
Do you need life insurance when buying a house?
Having life insurance is not a prerequisite from the point of view of the lender.
However, it is a good idea to have a life insurance policy in place before you buy a house because if something should happen to you while you are still paying off your mortgage, your family will be left with an outstanding balance and monthly mortgage payments.
If you're looking to buy life insurance, it's a good idea to be familiar with the types of perils that are typically covered under these types of policies.
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Do I need critical illness cover when buying a house?
Critical illness cover is a type of insurance that pays a lump sum when you're diagnosed with a critical illness.
If you buy a house and have this in place, it can help pay out your mortgage if you find yourself unable to work due to sickness or disability.
This type of cover is not a legal requirement for your mortgage lender; however, it can be useful if something does happen.
Do I need mortgage payment protection insurance?
Mortgage payment protection insurance (MPPI) can help if you can't make repayments on your loan. This is typically the case if you lose your job or need to take time off work for an illness or injury.
It is not mandatory, but if you are looking for additional security in making mortgage repayments, then it is certainly something that you may want to consider.
Typically an MPPI will pay out a monthly income if the borrower cannot pay their usual mortgage repayments due to unemployment or illness.
There are usually exclusions on what counts as 'unemployment' – some policies only cover you if it's a temporary job loss, whereas others will provide full cover if you lose your job.
Can you get a house insurance quote before buying?
Yes, and in fact, we would recommend that you compare home insurance and get a quote well in advance of your exchange date - when it becomes your responsibility.
You may choose to get a quote for buildings insurance only - the minimum required by your mortgage provider - or you could choose to find a combined buildings and contents insurance package.
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Understanding your risk exposure, the insurance products available and which ones are right for you can be a challenge - especially as a first-time buyer.
Working with an insurance expert ensures that your coverage is specifically tailored to your needs while remaining cost-effective.
There are insurance alternatives and safeguards accessible, and our experts can help you choose the right coverage for you and your family based on your specific needs.
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