What insurance will you need when you take out a mortgage?

If you are looking to take out a mortgage for a property in the North Yorkshire area you will also need to consider insurance. Some insurance policies are obligatory in order to take out the mortgage whereas others are advisable. Read on, to discover which insurance policies you will be obliged to take out.

There are four basic types of insurance policies involved in taking out a mortgage and these are as follows:

1. Buildings Insurance
2. Household Contents Insurance
3. Life Insurance
4. Mortgage Protection Cover

Every mortgage agreement differs and so it is advisable that you discuss the terms of the mortgage with your mortgage adviser before signing the agreement. In general terms the Buildings Insurance is obligatory and the other three are optional.

Buildings Insurance
This policy protects the structure of the house itself. Normally Buildings Insurance is index-linked which means that it will alter each year to match the Retail Price Index (for example as the cost of re-building the property changes, so does the amount payable). The exact nature of what is insured by the Buildings Insurance will differ from policy to policy but in general terms it will probably include the insurance of the permanent fixtures and fittings (e.g. the bath, toilet, fitted kitchens etc) and will normally protect your house from damage caused by the following:

• Fire, smoke and explosions
• Water - burst pipes, burst tanks etc
• Natural disasters - storms, lightening, floods, subsidence, landslide, earthquake
• Items falling on your house - aircraft (and their contents), trees, masts etc
  
• Theft and vandalism
  
• Civil commotion and riot
  

Contents Insurance This policy insures the contents of your home (including furniture and personal belongings) from damage and theft. It may also be useful to buy excess protection insurance to avoiding having to pay the first part of a claim.

Life Insurance This policy provides life cover for a fixed term which means that a lump sum of cash is payable on death in return for a monthly payment.  

Mortgage Protection Cover This policy means that your mortgage repayments will be paid for a certain period of time should you lose your job (through redundancy, illness etc)