Confused about House protection

SuperPootle

Hi All,

Was wondering if anyone can shed some light on cover for protecting your house. I'm a first-time buyer - my girlfriend and I have just had an offer accepted on our first pad (wahey!!!). We've been to a mortgage broker and got a mortgage sorted, but in order to waive their fees, we're obliged to take out some form of house/mortgage-related cover with a specific insurer. We're concerned that it's going to be one almighty rip-off, so I'm trying to do some homework so we can buy the cheapest insurance product from the broker (and save on paying out broker fees - we're strapped for cash as it is!), and shop around for the rest of the cover we'll need. What cover do you actually need? I've spent a while poking around on the web and can't find a definitive list of what you actually need to cover your home & mortgage. I know I'm sounding v. naive, but is mortgage life assurance the same as mortgage payment protection insurance? Aaaarrrggghhh! It's all doing my head in!!! I don't want to be in a position where I'm not covered, but I don't want to get us into a situation where we're paying over the odds for cover we won't need! Any advice would be greatly recommended. Ta!

SuperPootle ???

MarkyMarkD

"Mortgage life insurance" covers your lives so that the mortgage is repaid if one of you dies. Probably a good idea if you are buying jointly and don't want your other half to be left in the lurch.

"Mortgage payment protection insurance" covers the repayments if one or both of you is unable to earn due to accident sickness or unemployment (usually). May be a good idea, although more expensive if you buy it from the lender than if the broker gets it from a "best buy" supplier. Not as good an idea if either of you gets similar cover from your employer or if one of you isn't earning, or self employed, or on a short term contract - as in all of these cases, it might not pay out if you try to claim.

The only insurance you would be mad not to have, is the one you haven't mentioned:

"Buildings and contents insurance" which covers your house and its contents against storm, fire, theft (and optionally accidental damage). You really must have these.

Hope that helps

PS You have been stitched up by getting a broker who is forcing you to buy things from them in exchange for waiving a fee - there are many brokers who wouldn't charge a fee in the first place, given that they are also paid (a not insubstantial amount) by the lender.

SuperPootle

Thanks, MarkyMarkD!

I feared we had got stitched up, but as a first-time buyer, sorting out mortgages etc. is overwhelming. Next time we move we'll be doing things differently - we were recommended the broker, I think that's what a lot of people, especially ones with little or no experience do!

Thanks for pointing out the differences with the protection and what each one does - various websites designed to 'help' you seem to phrase things differently and only serve to confuse!

BTW, is life assurance/insurance (is there a difference?) also worth taking out? Is this a separate entity away from the mortgage? Many lenders seem to lump them together when talking about mortgage protection. Is is the same as mortgage life insurance?

Also, which is usually the cheapest item to take out? If we are obliged into taking out one form of cover, then which is the one that would usually cost the least (since more than likely it's going to be uncompetitive)? We're both 28 and in full-time permanent employment and not married (yet!!!)

I'm going to start ringing round so that I'm armed with costs when we go back and meet the broker so we limit the damage!

Cheers for the help,

SuperPootle

stuartlwilliams

As MarkyMarkD pointed out, you'd be mad to not get buildings insurance. Most mortgage companies (all that I know of) require the buildings insurance. Contents insurance is separate, but can be purchased with the building insurance. If you really are forced to buy some insurance from the broker, get the buildings insurance only, and then shop around for the other insurances that you feel you need. The internet is great for finding the best deals, this site can help.

Also, remember to cancel whatever insurance you buy from the broker at your earliest convenience and get better insurance. The broker will get a commission on that insurance each time you renew, and he's hoping you will not bother changing.

Then inform the broker you will never do business with him again. He get a commision for setting up the mortgage, that should be enough. Watch out, he'll probably try and sell you pension on your next visit.

Good luck.

MarkyMarkD

Most people would advise that you have life cover for the mortgage - often called decreasing term assurance, or mortgage protection assurance, or something like that. I think this is what your broker is talking about.

Whether you need further life assurance cover is up to your needs for your situation - most people at FTB level are happy to make sure the mortgage is paid off if they die and their partner isn't left with a big debt and less income to pay it off.

Many people would also recommend critical illness cover, which is available as an add-on to the life cover. This pays out if you get cancer or have a heart attack or a number of other similar type of serious conditions. It's FAR more expensive than life assurance, though, and arguably a bit of a luxury if things are tight. But if you can afford it, it's additional reassurance that you won't be left with your house getting repossessed if you are unable to work through serious illness.

Which brings us back to mortgage payment protection ... which acts in the short-term to cover the risk of you being unable to pay the mortgage, but doesn't provide a lump sum to pay the loan off.

dunstonh

Also, remember to cancel whatever insurance you buy from the broker at your earliest convenience and get better insurance. The broker will get a commission on that insurance each time you renew, and he's hoping you will not bother changing.

Check before you do that as there may be a clause in the terms of business that allows them to charge you should you cancel the policy in a defined period.

Nick99

I always thought the difference was:

Life 'Assurance'
Everything else 'Insurance'

because at some time you will 'Assuredly' die!

Incidentally, you will find any broker very keen to sell you Critical Illness insurance, because the commissions are phenomenal.