Published 19 Oct 2021

Insurance - What do you need to consider when buying a home?

We've teamed up with our friends at SRC Mortgage Solutions to discuss what insurance you need to consider when buying a home:

When it comes to protecting things of value, most people do not think twice about buying insurance.  Holiday insurance and pet insurance are two examples that most people purchase without a second thought.    

However, when it comes to protecting a home, things become a little more complicated. In this article we look at the types of protection that home buyers should consider.

Broadly speaking there are two types of protection to consider.  The first will protect the building and contents and the second protects the buyer against loss of income.

Buildings and Contents Insurance

If you are buying with a mortgage, then the lender will require you to insure the building.  They need to know that in the event of a disaster that the building can be repaired, and their interest is protected.  

If you are buying a leasehold property, it is likely that the buildings will be automatically insured  through a group policy arranged by the landlord.  You will pay your share of the policy premium via your monthly service charges

If you are buying a freehold policy, then you will need to arrange the policy yourself.  If you are using a mortgage broker, they should be able to help you with this.  

Your solicitor will normally check that you have buildings insurance in place prior to completion, but you should not rely on this.  Ultimately it is your responsibility to ensure that the building is insured and that the policy is renewed annually.

Contents insurance is optional and will protect your possessions in the event of fire, theft, or flood.  You need to assess the value of your contents to determine whether this cover is required but as the cost of cover is normally quite low it makes sense at least have a basic policy in place.

Life insurance

Nobody likes to think that the worst will happen but if you are buying a property jointly, or have a young family, you may want to think about what would happen if you were no longer around.  Would your partner and/or dependants be able to remain in the home?

Taking out a life insurance policy could mean that those left behind are financially secure and can remain in the home.

Unemployment Insurance

Losing your job can have a serious impact on your financial situation and could ultimately lead to you needing to sell the property if you are unable to meet your mortgage payments. Some Government assistance may be available to help but any benefits received are now repayable when your situation improves.

Unemployment insurance is designed to provide a monthly payment if you are made redundant.  The amount of benefit can be set at the outset, but as with most things, the higher the benefit you select the more the policy will likely cost.

Ill Health Insurance

Ill health can have a devastating affect on your lifestyle and ability to work.  If your unable to work, then quite obviously your income will stop.  If your illness is short-term this may not be a problem but if your condition is serious, then you may be forced to sell your home.

To understand whether ill health is a problem for you, you first need to understand what protection your employer provides. If you are employed in the public sector, it may be that you receive six months full pay followed by six months half pay if you become ill.  If you work in the private sector you may be lucky to work for an employer that provides an income protection scheme as part of your benefits.

Unfortunately, if you are self-employed, you will be reliant on the state for support and this protection is minimal.

So, what should you buyers do?

We would recommend that buyers seek professional advice from their lender or mortgage broker to establish their insurance needs. A good adviser should be able to work out any shortfalls and suggest suitable solutions.

Remember your home may be at risk if you are unable to keep up your repayments.

SRC Mortgage Solutions

SRC Mortgage Solutions help to explain the different insurance you may want to consider when buying a home.

Find homes with Peabody

At Peabody, we offer a range of ways to buy a home with us depending on your situation. We help first time buyers with Shared Ownership and Help to Buy schemes as well as offering properties on the open market for private purchasers.


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