First time buyer? Here’s what you need to know about insurance
Congratulations, you’ve just purchased your first home. You’ve just gone through one of the most stressful, yet exciting milestones of life for many.
Before you start thinking about building that flat-pack bookshelf, have you got suitable insurance in place to help you protect you and your new investment?
What types of insurance should I consider?
First up is buildings insurance, because in most cases this is a requirement by the mortgage lender. It’s there to protect against the cost of rebuilding, repairing or replacing parts of your home in the event of serious damage caused by things like fire, flood or storms.
Contents insurance can be purchased to cover the cost of loss, theft or damage to belongings within the home such as furniture and electronics and in some cases, it can be combined with buildings insurance.
Life insurance pays out a lump sum of money to your loved ones if you die during the policy term. If you have a partner or dependents, this type of insurance is a way of helping them to repay some or all of the mortgage, cover funeral costs and avoid the worry of covering other living expenses. A Family Income Benefit policy is a type of life insurance which pays out a monthly income rather than a lump sum. This can be a good way to help loved ones replace a lost income and cover monthly living costs.
Income protection is there to cover the loss of your income if you can’t work because of an illness or injury, meaning you can continue to repay your mortgage and other monthly costs.
Critical illness insurance will pay out a sum of money if you’re diagnosed with a specific illness defined by the insurer. The money can help to pay for private medical treatment, make adjustments to your home to cater for a change in lifestyle or to just ease any financial worries at a difficult time.
That’s a lot to digest, where do I start?
The most important thing is you’re choosing the right type of insurance for your circumstances and the best way to do that is to speak with a financial adviser, such as your mortgage adviser.
You’ll want to think about the amount of coverage you might need, what’s important for you to protect, whether you have sufficient savings to fall back on and what support you’re entitled to from your employer and/or state benefits if you go off sick.
What should I watch out for?
Common mistakes for first-time buyers include focusing solely on the cheapest policy instead of coverage that is more comprehensive and tailored to your needs. Failing to regularly review and update your insurance can mean over time you might become under or even over insured.
