Here at The Residential Mortgage Hub, we are firm believers that knowledge is invaluable, so we’ve put together this handy protection guide to help protect what’s most important to you.
Insurance Guide
Insurance gives you peace of mind that in the event of unforeseen circumstances, such as unemployment, illness or property damage you and your dependents have the necessary financial protection in place.
You must be a UK resident and at least 18 years old at the time of applying.
There are a variety of different insurance products available and each person will have different needs depending on their circumstances. If you’re unsure about the kind of level of insurance you need, our advisors will be able to talk you through the options to help establish the right products for you and your individual needs.
In short, you don’t need life insurance to take out a mortgage, however, it is something we recommend you seriously consider, particularly if you have any dependents who rely on your income.
We recommend that you take out the appropriate insurance as soon as possible, in order to protect you from the unknown.
Buildings insurance needs to be taken out at the time of the mortgage.
Your protection needs will change throughout your life as your family situation, employment, and financial circumstance change. It’s important to consider what kind of protection you might need and to review this on a regular basis to take into consideration any changes in circumstances.
Our Mortgage and Protection Advisors will take into account or review your existing protection products to put together a suitable plan to cover the important financial risks and talk through our recommendations.
Home Insurance
Home insurance can be split into two types of policy; buildings and contents cover. These can be obtained together under a single policy or individually. Although home insurance is not a legal requirement, most lenders will require you to have buildings insurance in place.
Buildings Insurance
Buildings insurance provides protection for the physical property and its fixtures and fittings (e.g. fitted kitchen and bathroom) in the case of storm, fire, flood, subsidence or theft.
Depending on your level of cover, it could also cover other outbuildings, such as sheds and your garage.
How much cover should you have?
You should insure your property for its rebuild cost, not its market value. Taking a policy with an unlimited sum insured will ensure you’re fully protected against damage to your property. Remember, our Mortgage and Protection Advisors will be able to discuss your cover requirements, so if you have any questions, please don’t hesitate to ask.
Contents Insurance
Contents insurance provides protection for your possessions that you keep within your property. For example, furniture, carpets and curtains would be covered in the case of storm, fire, flood, theft or accidental damage (this is usually an additional option).
When you arrange cover, you will need to estimate the value of replacing your contents as new.
How much cover should you have?
Fill in the table below and think about the value of each item should you have to make a claim. It is important to note that not all items may be covered in your policy, so make sure you check what is covered and for how much. By assessing how much your possessions are worth, you will have a much clearer idea of the importance of contents insurance. Additionally, you should use this table to discuss with your Mortgage and Protection Advisor to confirm that the worth of contents cover is sufficient to suit your needs.
| Room | Item | Estimated replacement value |
| Kitchen | Dishwasher | |
| Microwave | ||
| Kitchen utensils | ||
| Washing machine and tumble dryer | ||
| Fridge freezer | ||
| Electronics e.g. TV or radio | ||
| Gadgets e.g. blender, toaster | ||
| Living Room | Sofa | |
| Tables | ||
| TV | ||
| Other electronics | ||
| Ornaments and pictures | ||
| DVDs, video games and books | ||
| Carpets, curtains and soft furnishings | ||
| Dining Room | Chairs and table | |
| Electricals | ||
| Carpets, curtains and soft furnishings | ||
| Ornaments and pictures | ||
| Paintings | ||
| Bedroom | Beds | |
| Furniture | ||
| Shoes and clothes | ||
| Toys | ||
| Jewellery and watches | ||
| Bedding, carpets and curtains | ||
| TV and other electricals | ||
| Bathroom | Cabinets, shelving and mirrors | |
| Study | Soft furnishings, cabinets and shelving | |
| Laptop(s) / computer(s) | ||
| Other electronics | ||
| Shed, garage and garden | Gardening equipment | |
| Tools | ||
| Furniture | ||
| Exercise equipment | ||
| Play equipment e.g. slide, bikes, trampoline | ||
| Total amount of cover required (estimate only) £ |
Frequently Asked Questions
It is advisable to get buildings insurance, even if your home is newly built.
The majority of newly built homes in the UK are protected by an NHBC warranty called ‘Buildmark’, which lasts for 10 years.
While not a legal requirement, it is advisable for homeowners to get buildings insurance as it covers damage to the structure of their property.
If you decide to become a landlord and rent out your property, it is still your responsibility to take out buildings insurance. This often covers malicious damage by tenants, but it’s important to double-check with your provider.
Some landlords may decide to take out landlord insurance as well, which covers a variety of things such as accidental damage, liability, legal expenses and rent guarantee.
If you are taking out a mortgage to buy a house, your lender would have already required you to take out buildings insurance as a condition to get your mortgage.
For homebuyers not using a mortgage, it is advisable to get at least temporary buildings insurance from the moment you exchange contracts.
The seller’s buildings insurance will not cover you if there are any mishaps between the exchange of contracts and completion of sale.
Yes; a number of new insurers have sprung up offering monthly insurance, often targeted at renters.
Accident, Sickness and Unemployment Cover
This is one of the most common protection products as a mortgage payment is often someone’s biggest commitment. Commonly known as Accident, Sickness and Unemployment cover (ASU), this can give you peace of mind knowing that, in the event of redundancy or illness, your mortgage payments will be made and your home will be safe.
What is Accident, Sickness and Unemployment cover?
Accident, sickness and unemployment cover (often known as ASU) provides financial protection if you are unable to work for one of the following reasons:
- You are involuntarily unemployed or su er business failure (if you are self-employed);
- You are too ill to work;
- You are injured and are unable to work.
Your insurance will provide monthly payments, which can be used to help cover your monthly mortgage repayment and other related outgoings. You must have a mortgage to apply for this cover. You are able to purchase insurance for just unemployment cover or accident and sickness cover, or you can get a policy that covers all three.
Our Mortgage and Protection Advisors can discuss with you which option would be most appropriate for your circumstances.
Most mortgage payment protection policies will only pay out for a maximum of a year, so if you do have enough savings in place to cover you for this length of time (and possible additional time), then you may not require this insurance.
However, if you do not have sufficient savings, it is important to consider how you would meet your monthly mortgage and related payments without such cover.
How much cover should you have?
You should insure your property for its rebuild cost, not its market value. Taking a policy with an unlimited sum insured will ensure you’re fully protected against damage to your property.
Remember, our Mortgage and Protection Advisors will be able to discuss your cover requirements, so if you have any questions, please don’t hesitate to ask.
Frequently Asked Questions
Accident, Sickness and Unemployment cover is designed to cover involuntary redundancy – when you lose your job without warning.
It won’t pay out if you take voluntary redundancy, and it doesn’t work if you are fired for misconduct.
Accident, Sickness and Unemployment policies are available for people who are self-employed.
You need to specify your employment status with your insurer, and the terms may be a little different to regular ASU, but self-employed ASU policies do cover you in the event you can’t work due to illness or injury.
Most ASU policies are short-term; they tend to pay out for 12 months – or 24 months in some circumstances.
There are several things that aren’t covered by an ASU policy.
They include the following:
- Losing your job immediately after you buy: Most policies have a waiting period to prevent fraudulent claims. So if you buy a policy knowing you’re about to lose your job, you will find it hard to claim
- If you’ve not been in your job long enough
- Various medical conditions: ASU policies exclude medical conditions you already know about, and they often don’t let people claim if they’re o work for stress or back pain
Life Insurance
Most people insure their cars, home and even their pets, but they often forget to protect themselves.
Think about the grid below:
| What would happen if… | Who would be affected? | What would you want to happen? | What impact would it have on them? | How important is this to you? |
| You were unable to work? | ||||
| You were critically ill? | ||||
| You were to pass away? |
What is Life Insurance?
Life insurance pays out a cash lump sum, or a monthly benefit if selected, should you die or are diagnosed with a terminal illness before your cover ends. It can be used to help pay off your mortgage and/or provide money to help maintain standards of living for those loved ones left behind.
Some people think that a death in service policy provided by their employer means that they do not need life insurance. That may be true, but you need to consider whether the benefit will pay out enough money to pay off your mortgage and provide enough financial support for your loved ones. If it does not, additional life insurance may still be required.
How much cover should you have?
At the very least, you should have insurance in place to cover any debts plus additional costs (e.g. funeral expenses).
For sufficient cover, you will need to assess how much money is required to pay off your mortgage and other debts, plus provide for any dependants you have. Ideally, you would leave enough to invest so that your dependants could live on the income it generates.
Do I need life insurance?
Life insurance isn’t a legal requirement, but it can be a good idea if you have anyone that depends on you financially, like a partner or children. Life insurance can provide a financial safety net if you’re no longer around to provide for them anymore, as well as peace of mind.
If you’re looking to take out a mortgage, be aware that some mortgage providers might want you to have life insurance so they know the mortgage can be repaid if you do pass away.
Frequently Asked Questions
The chances are you’ll be eligible in most cases, even if you have a medical condition, as long as you live in the UK and you’re at least 18 years old.
The most important thing is to make sure you answer the questions honestly when you’re getting a quote, so your insurer has the full picture. This way, you know your cover will be valid.
Be mindful that there are many things that can affect how much your life insurance costs. Some of the main things to consider are:
The amount of cover – If you take out a higher amount of cover, your monthly payments are likely to be higher. Plus, the longer your cover lasts, the more you’ll pay overall.
Your age – Generally speaking, the older you are, the more expensive life insurance tends to be. This is because as you get older you have a greater chance of developing health issues.
Your health and lifestyle – You could cut the cost of life insurance by making healthy lifestyle choices such as giving up smoking, drinking less or losing weight.
Life insurance is there to provide financial security for anyone who depends on you, and there might be some big moments in your life when your circumstances change – these are good times to think about cover:
- Getting married
- Starting a family
- Starting or ending employment
- Taking out a mortgage
Critical Illness Cover
Critical illness cover is a form of insurance that offers protection should you be diagnosed with a critical illness during the term of your policy.
Critical illness cover pays out a tax-free lump sum if you’re diagnosed with an insured medical condition. It’s not the same as life insurance, which pays money to a person or people you name if you pass away.
You can spend the money how you wish. You can use it to clear debts, pay medical bills or adapt your home to your particular needs.
What conditions are covered by Critical Illness Cover?
The specific conditions covered by a critical illness policy will depend on the type of cover you take out and what your insurer offers, but certain core conditions are always included.
The most comprehensive policies can often cover between about 40 and 50 conditions – so it’s always worth discussing with one of our Mortgage and Protection Advisors.
How much cover should you have?
When you consider the level of cover you take out on your critical illness policy, you should factor in the level of financial support your dependants would need if you weren’t able to provide an income as a result of your illness. For example, you should think about:
- How much your household would need without your income
- How much remains on your mortgage or any other debts
- How much you can afford to pay every month for cover
Do I need critical illness cover?
Critical illness cover can o er valuable financial support if you become seriously ill – which can be particularly helpful if you don’t have significant savings to fall back on. You can use your pay out for costs such as:
- Household bills
- Private healthcare
- Rent or mortgage payments
- Lost earnings
Frequently Asked Questions
Some providers may have maximum age limits on their policies, and some conditions may also be excluded from cover based on your medical history. Our Mortgage and Protection Advisors will be able to discuss your cover requirements and personal circumstances, so if you have any questions, please don’t hesitate to ask.
Generally speaking you’ll need to be a UK resident to take out critical illness cover.
Be mindful that there are many things that can affect how much critical illness cover costs. Some of the main things to consider are:
Type of policy – Whether you choose to take out a single or joint policy; buying a joint policy could be cheaper.
Your age – The earlier you take out critical illness cover, generally the cheaper the premium.
Your occupation – Insurers ask about your job to help calculate how likely you are to make a claim – as some occupations carry a higher risk of health problems.
Your health, medical history & lifestyle – Insurers will assess your medical history to determine the risk of you becoming ill. Additionally some lifestyle habits, such as smoking, will also affect what you pay for critical illness cover.
Not all insurers will offer critical illness cover if you have a pre-existing condition, and you may have to pay more in premiums for the policy.
Income Protection
Income protection is a short-term insurance product which people take out in case unforeseen circumstances prevent them from working for a set period – for instance injury, illness or redundancy.
What is Income Protection?
Income protection refers to a family of insurance products which ensures that you can continue to meet your financial commitments if you are forced to take an extended break from work.
Income protection will pay you a regular monthly benefit if you lose your earnings due to being unable to work because of illness or injury. It can be used to help pay your monthly mortgage instalments, pay your monthly bills that don’t stop, e.g. council tax, gas and electric, TV subscriptions, and maintain your family’s lifestyle, e.g. holidays, mobile phones and eating out.
Income protection is especially useful for people working in dangerous industries who want to be sure their mortgage will always be covered.
Income protection only covers events beyond your control: you’re much less likely to be covered if you’re fired from your job or if you injure yourself deliberately.
Short-term vs long-term income protection
Most income protection insurance policies are short-term: they pay out for a set period, usually up to two years, while you get back on your feet and return to work.
Long-term income protection is available too, will provide a regular income for a longer, pre-agreed period until you are well enough to return to work. Unlike most short-term income protection policies, it will generally not cover you if you are made redundant. There are two types:
- Own occupation – This policy will pay out if the holder is prevented from doing any aspect of their job due to an accident or illness. Premiums are more expensive because there is more cover
- Suited tasks – This type of policy is cheaper, because your insurer won’t pay out if it decides that even though you can’t do your main job, your employer has other types of work you can still do
Frequently Asked Questions
Certain income protection policies are available for people who are self-employed. You need to specify your employment status with your insurer, and the terms may be a little different.
Most income protection policies are designed for the short-term, so they tend to pay out for 12 months, or 24 months in some circumstances.
When you apply for income protection, you specify to your insurer what you want your insurance to cover, whether it be to cover your income, your mortgage or loan repayments.
When unable to work due to illness or an accident, you might assume that your employer will continue to give you some level of income.
In reality, employees are usually moved onto Statutory Sick Pay within six months.
Very few employers support their staff for more than a year if they’re off sick from work. It’s important to check what your employer will provide for you if you’re off sick.
Depending on the level of savings you have, the loss of an income can soon leave you unable to pay essential household bills, such as mortgage/rent and utilities.
It can be particularly difficult if you’re self-employed and so have no sick pay to fall back on.
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount will depend upon your circumstances.
The fee is up to 1% but a typical fee is £598.
