There are four main insurances which you should consider when taking out a mortgage:

  • Life insurance
  • Buildings insurance
  • Critical illness cover
  • Income protection

Life insurance

There are two different types of life you could consider:

Decreasing term life insurance:  the sum assured decreases with the mortgage remaining. The sum assured will reduce its payout at the same rate as your mortgage balance each month.  This is ideal when taking out a capital and repayment mortgage.

Level term life insurance: the sum assured (whatever you choose) will be paid out on the event of your death. This is ideal in interest only mortgages. Also an option for capital repayment if you’d like extra money left to your family in the event of your death.

Buildings insurance

The last thing you want is for you to finally get that home that you’ve always wanted and for it to be damaged in the event of a disaster and leave you homeless. Buildings insurance can cover the cost of repairing or rebuilding if it has been damaged. Different companies have different policies which cover various protections. But here is a list of common things covered by insurance companies:

  • Weather damage including storms and flooding
  • Fire, explosion, lightning and earthquake
  • Subsidence, heave and landslip
  • Theft and attempted theft and vandalism
  • Fallen trees or branches and lampposts
  • Frozen and burst pipes
  • Vehicle or aircraft collision

Critical illness cover

Critical illness cover is also known as critical illness insurance. You will receive a tax free lump sum and this can be used to pay your mortgage in the event of a life threatening condition.  But will not pay out in the event of death. Each insurance provider has different conditions which they cover. This comes in useful as you may not be able to return to work in the event of the conditions. Some insurers also allow you to add critical illness cover to the life insurance policy.

Income protection insurance

Also known as mortgage payment protection insurance (MPPI). In the event of illness, accident or redundancy, an income protection insurance can help you keep up with your monthly mortgage payments. These policies are designed so you can cover up to a set percentage of your income or a set monthly income. You can choose the period in which you’d like to be covered for which can range for 6 months up till retirement.

For further information regarding insurances and to see if we can assist you please contact Rosebank mortgage brokers on 0207 096 0039.