Applying for mortgage - is insurance reallly needed?

QQQ

Mortgage lenders normally require building insurance. Of course it is advisable not to buy insurance from the same lender but is this requirement legitimate and enforceable? What would happen if insurance bought and then cancelled once mortgage is approved?

DVardysShadow

If you are found without insurance, the lender will insure and charge you. The reason is simple, the property forms the security for the loan. So if you are not good for the money, the lender can take the property. So they need the property to be insured in case of accidents. For example, the house could burn down and fry you. You are dead and cannot pay the mortgage and the pile of smoking ruins is not worth enough to repay the loan. The insurance covers the lender's loss.

Now I have explained that to you,it would be wilful negligence for you not to insure your mortgaged property.

dimbo61

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opinions4u

QQQ wrote: »

Mortgage lenders normally require building insurance. Of course it is advisable not to buy insurance from the same lender but is this requirement legitimate and enforceable? What would happen if insurance bought and then cancelled once mortgage is approved?

Forget the lender for a minute.

Why would you be stupid enough NOT to insure the buildings?

(The requirement is fair, legal and enforceable - if you need the mortgage, you have to meet the lender's conditions around buildings insurance. The lender has several thousand pounds at risk and has a right to protect this money).

firstaspect

You need buildings insurance for the entire term of the mortgage, it's part of the conditions. And for the price of a house why would you not want to pay the small addition for buildings insurance?

QQQ

firstaspect wrote: »

You need buildings insurance for the entire term of the mortgage, it's part of the conditions. And for the price of a house why would you not want to pay the small addition for buildings insurance?

1. I do not believe that insurance company would pay anything in case of claim rather than finding reason not to pay in a small print written by professionals with idea not to pay in most of cases.
2. Even if they pay they will increase the future premium so an the end of the day they will pay nothin and I will pay for damage myself plus their income.
3. I am sure more than half (if not 90%) of insurance premium goes into income of those who write small print and those selling me the 'insurance product'. So, is not it better to do self-insurance paying a little amount into savings account every month?

noodle

QQQ wrote: »

3. I am sure more than half (if not 90%) of insurance premium goes into income of those who write small print and those selling me the 'insurance product'. So, is not it better to do self-insurance paying a little amount into savings account every month?

No. Aside from the small business, explained by others, that this would in breach of your agreement... your small amount a month would never be enough to cover the cost of a 'claim'... so what's the point?

Also, I suggest you take a look at the profit margins of insurers.. your '90%' figure is comical.

Senior_Paper_Monitor

Er let me think about for a moment ...........

No

Now we've got that out of the way, let us assume that you 'self insure' (a concept I, and any business owner/manager will comprehend) by putting the average premium (say £50) on your average building (say £200,000 with a £120,000 rebuild value).

So as not to strain either of our brain cells too much lets ignore inflation and interest calculations (statistically, calculating these will only make the shortfall worse).

You put your £50 away for 25 years and are just settling for a nice retirment (in the home you have now purchased and own mortgage free) you have your self insurance protection of £15,000 to for the £120,000 rebuild (plus your own costs while its being done, making good, fixtures and fittings, furniture etc - as you obviously won't have contents cover either). Going to try doing the rest out of your old age pension (if there is one then!) ?

You don't even want to contemplate what happens if it all goes up just 6 months into building your 'self insurance' pot.

Also remember it covers many areas of your potential third party risk as a result of your property going up in flames.

Let me explain the basic principle of self insurance - if you can fund the payment of the potential risk out of available liquidatable funds at any and all times in the life of the risk without jeopardising your ongoing life/business/commitments and you consider the insurance cost to be higher than you are willing to pay then, and only then, should you consider self insuring.


I can only assume someone holds power of attorney for you - if not they should !

kai666

QQQ wrote: »

Mortgage lenders normally require building insurance. Of course it is advisable not to buy insurance from the same lender but is this requirement legitimate and enforceable? What would happen if insurance bought and then cancelled once mortgage is approved?

so what would you do if your property burnt down in 2 months time? 25 years worth of mortgage payments to go, and no property to show for it.

DVardysShadow

QQQ wrote: »

1. I do not believe that insurance company would pay anything in case of claim rather than finding reason not to pay in a small print written by professionals with idea not to pay in most of cases.
2. Even if they pay they will increase the future premium so an the end of the day they will pay nothin and I will pay for damage myself plus their income.
3. I am sure more than half (if not 90%) of insurance premium goes into income of those who write small print and those selling me the 'insurance product'. So, is not it better to do self-insurance paying a little amount into savings account every month?

1. Insurance companies do sometimes try and succeed in wriggling out of claims. Usually the insurance companies who are selected by cheapskates
2. This is roughly the idea of insurance, except that it is spread across a number of customers, most of whom do not claim.
3. If you lose a property worth £120,000 due to fire and you are paying £1,200 a year, you could self insure. But if you lost the property in year 5, you would have to wait 95 years for your self insurance to pay out in full. Most people can't wait that long.

Frankly, your thinking on insurance is so muddle headed as to be barmy. You should just pay up and accept that you will make yourself very vulnerable if you don't.

dunstonh

1. I do not believe that insurance company would pay anything in case of claim rather than finding reason not to pay in a small print written by professionals with idea not to pay in most of cases.

Why? Do you plan on committing fraud or telling lies?

2. Even if they pay they will increase the future premium so an the end of the day they will pay nothin and I will pay for damage myself plus their income.

Claims are typically held against you for 3 years.

3. I am sure more than half (if not 90%) of insurance premium goes into income of those who write small print and those selling me the 'insurance product'. So, is not it better to do self-insurance paying a little amount into savings account every month?

It doesnt matter how they spend their money as long as you are getting what you pay for.


This has to be one of the daftest threads going. Who in their right mind would not pay the tiny amount required each year to insure your property.