Cover and insurance when buying property

jaffs

Okay i am in the processof buying my first house and i have been given lots of quote for various things:

Buildings and contents insurance
Mortgage and lifestyle protection
Decreasing mortgage cover.

Basically i'm just a little lost as to whether i need all these things, obviously i wil be getting the buildings and contents insurance, but what about the rest, do you have to have them, are they a good thing to have?

lisyloo

The basic answer is that it depends entirely on your circumstances.

Life insurance pays out to your dependents if you die. They would have to survive without your income. So if you have a spouse who is a full time carer or who would like to remain in the same house (possibly beyond their single income) and you have kids that needs looking after then you need to provide for them after your death.
If you have no dependents then you probably don't need life cover.
The mortgage company can simply sell the house to pay off the mortgage.

One thing to add here is it's worth checking your employment benefits (or pension benefits). Some employers pay out if you die and some pension schemes would provide a lump sum and/or pension if you died before retirement.
It definitely makes sense to check out what you already have before buying more.

You should definitely have buildings and contents in case of fire, flood burglary etc.

As for sickness, well your employer may have a sick pay scheme short term, but after that you would be on benefits.
You need to think how you would survive long term.
If it's just you and you would be happy to sell the house and have mum look after you then perhaps you don't need to worry.
However if you want to maintain an independent lifestyle if you were sick then you need to provide an income.
PHI is the best product for this (IMO) as it provides an income until retirement if you cannot work.
Some employers do provide this (both of ours do) so you might be lucky.
Do not confuse with private medical cover which pays out for hospital treatment as oppose to provide an income.
Personally I prefer to protect my income rather than protect spcecific bill like mortgage, credit cards.
Has always made sense to me to cover your entire income and then you can cover all your existing liabilities.

Redundancy.
Well this depends on a number of factors.
Is your job secure?
Could you easily find another one?
Do you have a spouse you coudl rely on for a while?
Do you have savings?
Do you have a decent redundancy package?
The answers to these questions should tell you whether you need to cover your income in the event of redundancy.
Again if you are single one option is to sell the house and move in with mum and dad so none of this is mandatory it's a matter of choice and to get it all will cost quite a bit.

The only mandatory one is buildings insurance.
This is almost certainly a clause in your mortgage contract.
This is because the loan is secured on the house so the lender has an interest if it burns down (it's their loss not just yours).
Contents insurance is very sensible but nothing is mandatory except buildings.

You might like to consider seeing a few advisors.
They will of course advise you to take lots of policies and of course in an ideal world we'd all have everything, but I suspect you can't afford everything and might have to compromise.

Personally I don't have redundancy cover but we have two incomes, so we are taking a chance that we would have to live off one income.
It's simply not possible to have everything you would like without paying over your whole pay packet.

Lots of people don't have long term income cover and take a chance.
If you did get struck down with an illness and could never work again then you'd have to sell your house and be on benefits. A lot of people take that chance when they are young.
You need to think about what the risks are and what the consequences are for you e.g. selling the house, living off benefits etc.
For some people the consequences are not tolerable e.g. if you have young kids, but for others it's ok to take a chance.

jaffs

Thank you, lots to think about.

I'm single so have no dependants, also i get sick pay from work so i guess thats a factor to think about.

There's always the risk of redundancy in these times, no risk to me yet but is this something to cover just in case?

lisyloo

There's always the risk of redundancy in these times, no risk to me yet but is this something to cover just in case?

Depends.
Some people will get a large redundancy payout others aren't entitled to very much.
If you have a large redundancy payout and/or savings then you might not bother.
If you're in secure employment or are working on a long term project then you might decide to take a chance.

If you really want to keep your house, don't have large savings or redundancy pay out then you have a need for it.

Bear in mind your sick pay scheme at work probably only pays out for a period e.g. six months.

These insurances are expensive so you might have to chose between them.