Up until around the 1990s, many Mortgage lenders insisted on Life Insurance being taken out when applying for a Mortgage. Typically that could be done via the bank or elsewhere.
The Mortgage lenders would also want the policy assigned to them to pay out should one or more of the mortgage holders pass away, the mortgage would then be cleared in full.
This all changed however and now there is no requirement for Life Insurance to be taken out with any Mortgage.
Are there any Insurance requirements for a Mortgage?
The only insurance any Mortgage lender will insist on is Buildings insurance. There is no requirement where this is taken out, so you can do it through the bank, the broker or online. What you do need to check however is that it fits the lenders requirements.
Some lenders have a minimum requirement of £500,000 buildings cover, others need it linked to inflation. In the main, most insurers now offer “blanket cover” where they will cover up to £1m. Bare in mind that you are only covering the rebuild cost of the property, not the value of the property.
Some Mortgage Brokers do have requirements for you to take out a policy and keep it in force for between 2 and 4 years as a minimum. We (Mortgage Success) do not have that requirement. We will always discuss the types of insurance out there so that you are aware of them – we have a regulatory requirement to do that – but the choice will always be yours to take out a policy or not.
Should I take out Insurance with my Mortgage?
There is no definitive answer for this. Ultimately it will come down to your circumstances. There are 5 main types of insurance:
- Life Insurance
- Critical Illness Insurance
- Income Protection Insurance
- Buildings Insurance
- Contents Insurance
You may have a requirement for non, all or some of these. Usually cost will be the deciding factor. Very few people can afford all of them and so there is usually a cost/need discussion.
There is an argument that some cover is better than none – for example, if your income is £1,500 a month and the new Mortgage plus bills comes to £1,000 a month then £1,000 a month income protection is a happy medium. Chances are it will mean luxuries go out of the window in the event of having to make a claim, but at the very least you keep a roof over your head and pay your bills without worrying.
At Mortgage Success, we will discuss the insurances above in more detail where you are not familiar with them. Where you show an interest in one or more, we will work out a budget and see what we can get you for your budget.
It is important to remember:
- We are not cheesy insurance salesmen.
- We have no sales targets – for Mortgages, insurances or anything else.
- We are fully regulated.
Those things combined mean we are not allowed, nor are we under any pressure to flog you insurance. We are also very clear on the fact that you are under no obligation to take out any insurance through Mortgage Success and the only requirement is that you need Buildings Insurance as a bare minimum (unless your are purchasing a flat where Buildings insurance is included) which also does not need to be taken out through ourselves.
If you would like to have a discussion about the options and see if any are of interest, do please get in touch.