If you’re considering getting a mortgage, congratulations! You're embarking on an exciting journey of purchasing a home in the UK. But along with the purchase you may also need to consider some important factors such as ‘Do I need home insurance to get a mortgage?’ The answer is slightly more complicated than a simple yes or no. We will explore if and why you need to have an insurance policy when getting into a mortgage.

Types of coverage

Typically there are two types of insurance coverage for properties. The Buildings Insurance which provides cover for the structure of the building, any permanent fittings within the building and for any other structures within the property such as garages, sheds, etc. 

The other coverage is contents insurance. This cover provides cover for all the movable items within the building. Content insurance typically is for items such as electronic appliances, furniture, computers, etc. Between the two of these insurance types, a lender will not consider contents insurance as important as building insurance when getting a mortgage.

The Essentials: Buildings Insurance

While home insurance itself isn't a legal obligation, buildings insurance is practically a non-negotiable requirement for securing a mortgage. This type of insurance protects the physical structure of your property, providing cover for repairs or rebuilding costs in case of unforeseen events like fire, theft, floods or any other natural disasters. In the event of such an unfortunate occurrence, and you do not have a buildings insurance cover, the financial burden of rebuilding the damaged property could be a devastating setback. Mortgage lenders see insurance as a safety net for their investment. An insurance policy will ensure their monies aren't lost forever even if the property gets severely damaged.

Although not stipulated as mandatory in the UK, a majority of lenders  may not be willing to proceed with a mortgage for a property if a policy isn’t in place. This is why building insurance is considered essential.

Key points you may want to keep in mind:

While not compulsory for securing a mortgage, insurance offers invaluable protection for your building as well as its contents. Apart from obtaining insurance for the sole purpose of getting your mortgage approved, a policy provides security and peace of mind. For instance, imagine a burglary leaves you with your possessions stolen, contents insurance ensures you can replace them without facing a significant financial setback.

Most mortgage lenders will require proof of buildings insurance before releasing funds.

The coverage will depend on the value of your property. And you may also consider additional coverages for outlying buildings such as sheds, or garages if required.

Contents insurance

Contents insurance is purchased separately from buildings insurance. The level of coverage is determined by the total value of your belongings. You may also consider additional features like accidental damage or personal liability coverages based on your needs. If you see the need to get both the buildings insurance and contents covers, getting them from a single provider could give you a discount as well.

Choosing the right insurance is a personal decision. Carefully assess your needs, budget, and risk tolerance before making any choices. Talking to a qualified insurance broker can help you navigate different options and secure the right coverage for your circumstances. Speak to the professionals at BVS Mortgages and Financial Services. Their qualified advisers will be able to provide you with insights and invaluable information when advising on an insurance policy that works to suit your specifics.

Conclusion

While building insurance is an essential component in the mortgage process in the UK, you may want to keep in mind that insurance is more than just getting a policy to satisfy the requirements of your mortgage lender. It is an investment to protect your property, belongings, and ultimately, provide you with a sense of peace of mind. By understanding your insurance needs and making informed choices, you can ensure a smooth and stress-free homeownership journey.

* Approved by the Openwork Partnership on 08/03/2024