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Insurance for new home owners

Insurance is designed to give you peace of mind and financial support when the unexpected happens. There are many different types available, so take a look at the different types of insurance available, before deciding how much cover you’re likely to need.

Different types of insurance

Mortgage payment protection insurance (MPPI)

Would you be able to make mortgage payments if you suffered a serious accident or illness that prevented you from working? What if you were made redundant? 

MPPI helps you cover your mortgage payments when you're no longer able. Each product is different, but they usually pay out a set amount every month for a period of up to two years until you get back on your feet. You can either pick a policy that is linked to the cost of your mortgage, or one that pays a proportion of your base monthly salary. 

MPPI can cover unemployment only, accident and sickness only, or a combination of the two. Costs vary between insurers, taking into account factors such as age, occupation and product features. Figures from Which? show the UK average MPPI quote is approximately £22 a month for a 30-year-old, and just over £25 for a 50-year-old  Read More

Life insurance

Life insurance includes specific products designed to cover your mortgage payments if you’re no longer around to make them. 

These are often known as 'mortgage life insurance' or 'decreasing term life insurance' - the amount of cover you have will come down over time as the amount you’ve got left to pay on your mortgage reduces. 

Some mortgage lenders may require you to have this type of insurance in place before buying a new home and offer you their in-house product, but you are not obliged to buy it from them. Remember, mortgage life insurance may not be the best option for you and your family, as it only covers your home loan and won't provide a nest egg for your loved ones. 

Home insurance 

Home insurance is made up of two types of cover: buildings and contents. It's worth remembering that while contents insurance is usually optional (although highly recommended), most mortgage providers will insist on you having buildings insurance. 

Comprehensive home insurance should protect your property and everything inside from damage, loss or theft. 

The differences between buildings and contents insurance 

Buildings and contents cover are two separate parts that make up home insurance, and there are some key differences. 

Buildings insurance

Buildings insurance financially protects you against damage to the structure of your home. Your buildings insurance also usually covers sheds, garages and outbuildings, as well as cables, pipes and other permanent fixtures connected to the property. 

To be approved for a mortgage, your lender will usually ask you to take out buildings insurance before you can buy your new home. You’ll also have to keep renewing it each year. Most policies cover damage caused by:

    •    Natural disasters
    •    Theft and vandalism
    •    Subsidence
    •    Vehicle collisions with your home
    •    Plumbing problems due to burst or frozen pipes
    •    Explosions, such as from a gas leak

Contents insurance

Contents insurance covers most objects inside your property, such as furniture, electronics, appliances, clothes and other possessions. It’s likely that some fixtures, including your carpets and curtains, will also be included.

Particularly expensive items like laptops, mobile phones, art and jewellery may have an upper limit on how much the insurer will cover although you can usually negotiate, albeit by paying higher premiums. 

Mortgage lenders won't ask you to take out contents insurance, but you might feel safer in the knowledge your belongings will be covered if they’re lost, damaged or stolen. 

Your policy should protect against fires, water leaks, flooding and various other natural disasters, as well as burglaries and vandalism. 

How much home insurance to get

The ideal amount of home insurance cover you need depends on various factors, including your personal risk tolerance level, the value of your home and possessions, your budget and where you live. 

Calculating your buildings insurance

For buildings insurance, your mortgage lender will ask that you can at least take out enough to cover the cost of rebuilding your home. This is known as the 'sum insured'.

There are online calculators to help you estimate this amount, although you can get a more accurate figure through a valuation or survey when buying your home. Paying for a valuation or survey may also be necessary if you live in a listed building or one that has special features, such as thatched roofs or period architecture. 

It is also important to update your buildings insurance when you perform home improvements like adding a conservatory or renovating a basement, as this will significantly change the rebuild value of your home. 

On top of your standard buildings insurance, you can also choose a range of optional extras to cover accidental damage, legal expenses, alternative accommodation and other services. 

Calculating your contents insurance

The level of coverage you require for contents insurance largely depends on what you own. Go through every room in your house and calculate how much it would cost to replace items valuable enough to pursue an insurance claim. 

Particularly expensive items like laptops, art and jewellery may have upper on how much cover the insurer will provide, although you can usually take out separate policies or negotiate higher premiums for these. 

There are two types of contents insurance: 

New for old: This will replace the item that is damaged with a brand new equivalent but at the cost of higher premiums. 

Indemnity: Your insurance will only cover the current value of the item, so you won't receive the original purchase price of a three-year-old smartphone, for example. 

There are various extras you can add to your contents insurance, including accidental damage features and coverage for expensive items that are lost, stolen or damaged when you take them out of the home.

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