Mortgage insurance costs???

Martin8870

FTB, We have just had our mortgage offer by NatWest and I’m aware that our IMB is going to try and sell us an insurance of some sort which we need for our mortgage, clearly I know nothing about this only that he said over the phone that we will be discussing it towards the end end of next week so I’ve a few questions before I feel as if I’m pushed into it.

1 what is this insurance actually for
2 is it essential we take insurance out
3 what should I expect to pay
4 do I need to take a insurance policy out via our broker or can I shop else where for a better deal?


Thanks for any input

Robin9

They will require you to insure the building.

Get competitive quotes.

They will require you to insure the building. There is no requirement to have their insurance - shop around.

You will also need Contents insurance- a combined Buildings and Contents policy may be cheaper.

amnblog

Martin8870 wrote: »

1 what is this insurance actually for

Could be to replace you, or the property.

Martin8870 wrote: »

2 is it essential we take insurance out

For the property - the lenders will require it
For you - most people have a need

Martin8870 wrote: »

3 what should I expect to pay
Depends what you invest in, no way of knowing here

Martin8870 wrote: »

4 do I need to take a insurance policy out via our broker or can I shop else where for a better deal?

You are free to purchase where you wish, the Broker is the best source of advice and options.

ACG

The only insurance you have to have is Buildings insurance, everything else is purely optional.

You can take policies out through the broker or elsewhere.

The options you will probably discuss are:
Buildings insurance,
Contents insurance,
Life Insurance,
Income Protection/PHI,
Critical Illness.

If you die, what will happen to the Mortgage? Will it fall on someone else? ie a partner? If so, would they struggle on their own? - If so life insurance is worth considering.

Same question to the above, but if you have a critical illness but do not die (heart attack, cancer, stroke etc).

What happens if you are unable to work due to ill health? Would you or your partner struggle to pay the bills? If so, then you might want to consider income protection. Most people get some sort of sick pay at work, the most I have seen is 12 months full pay. What happens after that? The average claim on income protection is around 6-7 years.

Life insurance is cheap, I did around 15 quotes last week and they were all in and around the £15-20 a month premium.

Critical Illness is not so cheap, premiums were around £60-200 a month. But it is more likely to pay out and as bad as it sounds, if you die you stop costing money. If you are unable to work, you are still an expense.

Income protection, usually costs somewhere in the middle of the 2.

What I try to do is get a budget form my customers and do an element of cover for them that protects the necessities. Nobody can afford to cover everything.

Income protection will pay a monthly benefit, the other 2 would usually pay a lump sum.

Thats a really quick run down, but they are a little more complex than that. I used to work for a life office and did a months training and it still took me another 6 months to get my head around it all. I am all for saving a few quid, but trust your broker with this sort of thing. If they get it wrong, you are protected to some extent. If you get it wrong with a non advised service, your not.

Martin8870

I see thanks very much for that detailed description ACG, that explains a lot. Well we received our offer letter today and as you stated it say we will need to take out buildings insurance and they recommended life insurance. Our house is not yet built so hopefully our monthly insurance repayments and cover for that matter will not start until the day we get our keys, I think as long as we have a policy in place that’s all they need to see.

It’s funny how they can potentially turn down the offer on completion if you take out credit which they were not aware of and might affect your affordability but they are fine with you taking out insurance to cover the banks asset if the building was to fall down. That said we are not planning on taking out any further credit only a new sofa but we will wait until we have our keys and everything has complete.


Thanks for all your comments it’s made it a lot clearer for me and I will look forward to the phone call of the broker to explain this further.

ACG

Most lenders use ONS figures for affordability, so it will to some degree account for you paying insurance on the drip.