What Insurance Do I Need To Buy A House?

by | Apr 8, 2022 | Mortgages | 0 comments

Making moves towards buying your first home is a complex process.

From figuring out how much you have to work with to where you want to live – not to mention organising the paperwork required to submit your mortgage application in the first place – there is a lot to think about.

One of the most important subjects to consider when setting out on your journey is insurance – and specifically, what type of insurance you need to purchase a house.

The answer to this question is lengthy and complicated, given that many forms of insurance can – and in some cases, must – be availed of when applying for a mortgage.

In this article, we examine the various types of cover that should be on your radar as you embark on one of life’s biggest milestones, and help you answer the question of ‘what insurance do I need to buy a house?’.


Mortgage Protection Insurance


Taking out a mortgage protection insurance policy is a compulsory step in your home-owning journey.

This type of insurance ensures that your mortgage balance will be paid in full in the event of your death – or the death of another policyholder – before the mortgage term is complete. If your mortgage is a joint mortgage both people need to have mortgage protection.

It is a vital component of the overall mortgage process, both in terms of its status as a legal condition of mortgage approval and the financial peace of mind it offers to you, your loved ones, and indeed your lending institution.

The two main types of mortgage protection insurance are decreasing term cover and level term cover.


Decreasing Term Cover


The most common type of mortgage protection insurance, which reduces in line with your mortgage repayments. This means that as your outstanding mortgage balance reduces, so too does the coverage your policy provides, as it has less to pay out in the event of the policy owner’s untimely death.

While the level of cover continuously decreases over the period of the term, your regular payments will typically stay at a set monthly amount.


Level Term Cover


When you take out level term cover, the sum you are insured for at the beginning of the term will remain unchanged for the duration of the policy. As such, it doesn’t matter what stage of the term a claim is made – the amount paid out will stay the same.

So, if you die before your mortgage has been fully paid off, the amount paid out by the insurance company will cover the mortgage balance, with any excess from the coverage sum going to your estate.

Certain exemptions may be allocated for those unable to acquire mortgage protection insurance and are made strictly on a case-by-case basis.


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Buildings Insurance


Another compulsory type of insurance that must be organised in line with mortgage approval and drawdown is buildings insurance.

It is a form of house insurance that covers repair or rebuilding work following any physical structural damage to your property, such as walls and roof, due to damage, theft or loss.

While it applies to the physical structure of the building including the roof, walls and floor, buildings insurance may also cover fixtures and fittings, outbuildings (such as a garage), and outside structures like patios and boundary walls.

Moveable objects, however, such as furniture and other valuable possessions, are not included under buildings insurance and a separate contents insurance policy should be taken out if you wish to protect your personal items.

Rather than being based on the market value of your home, the amount of cover will be calculated based on the estimated cost of rebuilding your property. The best way to ensure an accurate calculation – which is crucial to ensure you receive an adequate sum should you ever need to make a claim – is by recruiting the services of an independent surveyor.

If you would like to gauge a ballpark rebuild cost in advance of this, you can use The Society of Chartered Surveyors’ rebuild calculator to do so.

While most lenders are required by law to ensure that borrowers have mortgage protection insurance in place, building insurance is not a legal necessity. However, in order to safeguard their loan, many lending institutions will insist that you take out a buildings insurance policy, meaning it is likely – and advisable – to figure it into your budget.

There are also other forms of insurance that, although not compulsory, further protect your capacity to repay your mortgage and your overall financial security.


Other forms of insurance to consider


Taking out a mortgage to buy your first home is a huge deal, but it isn’t without risk.

Ensuring you have the means to honour your regular repayments is crucial to avoid losing your home, particularly if a drastic change in your financial situation were to occur.

For this reason, it is worth considering several other forms of insurance when taking that giant leap onto the property ladder.


Income Protection Insurance:


This type of policy covers regular loss of earnings that occurs as a result of an illness or injury that prevents you from doing your job.

Income protection insurance can serve as a crucial safety net that allows mortgage holders to maintain their regular payments should they become incapacitated and unable to carry out their work.


Serious Illness Cover:


Serious illness cover differs from income protection insurance in that it entitles the policyholder to a lump sum if they are diagnosed with a serious or life-threatening condition, such as cancer, a stroke or kidney failure.

In the event of a claim, an insurer will either pay out a full or partial payment, which is dependent on the type of illness you have.


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Make the decision with help from Symmetry Financial


Aside from deciding on which types of cover are right for you, we recommend you explore the terms and conditions of each individual policy you are considering.

Every policy varies widely in terms of the benefits they offer, so to ensure you are getting value for money and that any potential pay-outs will be adequate for your needs, it’s extremely important that you speak to a qualified professional about your specific needs

This can be an overwhelming task, particularly for first-time buyers who already have lots of paperwork on their plate, so again, enlisting the services of an experienced financial advisor is a wise move.

Symmetry Financial is here to explain all of the choices available to you in simple, concise language, allowing you to make a fully informed decision.

We will guide you on the decisions you need to make, based on your personal and financial circumstances, so you won’t have to second guess yourself.

Contact us today and allow us to take you seamlessly through the entire mortgage process.

If you’d like a free, no-obligation consultation for your mortgage, pension or financial needs, get in touch here, call us on 01 6831673 or email us directly on info@symmetryfinancial.ie.