There are many things we need to consider when buying a house; it is why many regard it as one of the most stressful experiences in life. From trying to find the perfect home to getting an offer accepted and applying for a mortgage to organizing the move, you can easily find yourself tearing your hair out.
Of course, it is all worth it in the end when you finally get the keys to your new home and can start making it your own.
But before that happens, there are a lot of things you need to think about and prepare. Aside from your mortgage, insurance is one of the most important areas you’ll need to consider.
Insurance is something we are all familiar with. It features in many areas of our lives. For example, when we book a holiday, we take out insurance to ensure our trip of a lifetime doesn’t leave us out of pocket due to illness or airline bankruptcy.
You’ll also likely have purchased insurance for your car, your smartphone, or even your pet. If you’re a fan of card games, there’s a good chance you’ve even come across it while playing blackjack. This is because a common side bet in the game enables players to insure against a loss should the dealer have blackjack by allowing them to place a second wager of equal value that their opponent is holding that winning hand. It means that, in that instance, the player is left in the same place they started the round in.
You’ll likely end up purchasing multiple insurance policies during the house-buying process, acquiring cover for everything you own. So, what sorts of policies do you need to consider and/or ask your broker about?
Buildings insurance is a condition of most mortgages. If you want the bank to lend you money to buy your dream home, you need a bit of paper from an insurance company that says they’ll cover the cost of rebuilding it should the worst happen.
For most people, buildings insurance is relatively cheap. Depending on your home’s size, value, and location, you can purchase a policy for around £100.
You’ll need to renew it yearly, which can be done automatically or by manually shopping around every 12 months.
While buildings insurance protects you against loss of the building, a contents policy insures the things you put in it. This includes your clothes, your electronics, and your furniture.
Walk around your house and add up everything you own; you’ll quickly notice that it’ll cost tens of thousands to replace it. That’s why you will most likely need the policy to protect you from having to bear that liability in the event it’s all damaged or stolen.
Life and Critical Insurance
Life insurance is something that few people like to talk about, but it can be an incredibly important topic.
While most policies you’ll ever buy focus on insuring “things,” life insurance, as its name suggests, provides cover for your life. Essentially, it’s designed to provide financial assistance to the people you leave behind if you are to pass early.
This can allow your partner to pay off the mortgage and/or have some cash to cover expenses, giving them one less thing to worry about.
Unlike buildings and contents insurance, you will typically take out a single life insurance policy and continue to pay the premiums until the end (usually when you reach retirement age).
Critical illness insurance works similarly, but instead of insuring against death, it provides a payout should you suffer long-term ill health.
Your broker will be able to assist with finding you the best deals, but, on the whole, it’s cheaper if you get a policy sooner rather than later.
Income protection is similar, in many ways, to life and critical illness insurance, but it insures your income. It’s designed to payout a regular monthly sum if you cannot work.
It usually has some conditions, such as not paying out right away. Instead, you’ll typically be required to wait several months, but it can give you peace of mind should you be incapacitated for some reason.
You will typically pay the premiums for the policy for many years or even decades, so it’s worth speaking to a broker to find the best deal when buying a house.
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