Why do I need Insurance?

To protect yourself, and to protect your loved ones. All the information you need to understand your situation

Why do I need to insurance when I take out a mortgage?

Insurance has a use for everyone. To discover it’s use for you, we’d have to understand more about your financial situation, your family situation & your life circumstances. When you take out a mortgage, there is often a clearly defined need uncovered, but the only mandatory insurance you must take out when you arrange a mortgage is Buildings insurance. 

The main use for insurance is to make sure you can continue to pay your mortgage payments no matter what happens, or to protect your family from future financial hardship. 

Questions to ask yourself:

  • If I was unable to work, how would I/we afford to pay the mortgage?
  • If I was diagnosed with a Critical Illness, how much time would I want off work to focus on my recovery?
  • How long could my savings cover my/our committed expenses & lifestyle costs?
  • If my income stopped tomorrow, how would my loved ones cope?
 

By answering those questions honestly, together we’ll identify what your needs are & we can talk through the most suitable cover for you, bespoke to your individual needs. 

Insurance is typically important to consider in the following situations:

  • You have a mortgage
  • You have high monthly expenditure
  • You have a spouse or children, or others who financially depend on you
  • You have low savings
  • You have no/low workplace benefits
  • You value peace of mind

The most common reasons for being unable to make your monthly mortgage payments are: death, diagnosis of a critical illness, long term illness, or suffering an accident

All of the most common reasons for missing mortgage payments can be covered by insurance. 

Nobody wants to think about any of those things happening, & nobody thinks it’s going to happen to them. Unfortunately, life happens & we need to consider the impact of potential unexpected events so that in a difficult time, you aren’t left in financial hardship, shouldering a lot of additional, avoidable worry.

Insurance is the foundation of every strong financial plan.

Speak To An Advisor

Did You Know?

Statutory sick pay in the UK is £109.40 per week. Do you know what your sick pay details are?

Types of Insurance: 

LIFE COVER - Does what it says on the tin. Covers you in the event of death.

CRITICAL ILLNESS COVER - Pays a tax free lump sum on diagnosis of a defined Critical Illness

INCOME PROTECTION - Pays you a monthly income to replace your earnings if you're unable to work due to illness or injury

FAMILY INCOME BENEFIT (FIB) - A form of life insurance that pays your family regular ongoing monthly income for a defined period after death

Mortgage Affordability & Insurance

When we arrange your mortgage, Mortgage Lenders base how much you can borrow on your FULL household income. Often people buy a home on their own, or with their partner. The mortgage lender agrees to loan you a large sum of money because you’ve passed their affordability checks based on your current level of income. Once you have that mortgage is in place, you’re expected to continue to make your payments on time, no matter what happens. 

You’re given a mortgage based on your income & your ability to earn money, but what happens if your ability to earn that income is affected through illness, injury or a death in the household? You’re still expected to pay. 

The mortgage lender has a charge over your home which means that if for any reason you stop paying your mortgage, after a defined period of time, the lender has the right to repossess your house, so they can sell the property & repay the sum of money you owe them. 

Insurance is a peace of mind product that makes sure that never happens, no matter what life throws at you.

In 2022, Protection Insurers paid out £6.5 billion to support individuals & families. Individual policies paid out 287,000 claims for life insurance, income protection & critical illness, with claim acceptance rates of around 98%

Source: Association of British Insurers, 30/05/2023

Frequently Asked Questions

The short answer is yes. Here’s the question you need to ask yourself:

  • If you buy a house alone, you are the sole earner in your household. Without your income, how long could you afford to pay your mortgage?


Life insurance is less important for those buying a home on their own if you have no children or dependents, unless you want the property to be passed to someone mortgage free if you were to pass away. 

HOWEVER, Critical Illness insurance & Income protection insurance are VITAL for people buying a home on their own, to protect your ability to earn money & pay your mortgage costs. 

Importantly, if you’ve bought a property with your partner then you have to consider, without you, could your partner afford to pay the mortgage all on their own?

And for the parents reading this, what would it mean for your kids if somebody in the household suffered an income threatening condition? 

We understand that these questions are hard to answer & difficult to think about… but that’s why they’re so important to consider. 

If you’re buying a house with somebody else, you should undoubtedly be considering taking out life insurance, with a large focus also based on taking out a suitable critical illness & income protection policy. 

REMEMBER – for the parents reading this, Children’s critical illness cover can be included on your Critical Illness insurance policy, so you can also protect your kids, & get them the best care available if anything were to ever happen to them. 

Yes you do. Sick pay should work alongside your insurance policy. When arranging a mortgage with us, we’ll always ask you to detail what your sick pay, death in service & other workplace benefits look like so there are no gaps in your cover.

Even those with the best workplace benefits out there often still have large gaps that would leave them vulnerable without a personal policy being taken out alongside it. 

A common oversight is people often move jobs. If you move, you have no idea what your future employment benefits will look like. 

Your workplace sick pay works alongside your insurance. Your insurance can be set to a defined “Deferred period” 

Pre existing conditions are conditions that you have suffered from before applying for insurance. Often, you can still be insured if you have existing conditions but they must be disclosed to the insurer. 

The insurer could increase your monthly premium if the preexisting condition is likely to make you considered to be a higher risk person to insure, & they could also accept to cover you but exclude some/all of your pre existing conditions, depending on severity. 

The only mandatory insurance to have on completion of a mortgage is Buildings Insurance. This is to protect the mortgage lender as your house is the security for the loan they are giving you. 

All other insurance is not mandatory, but it is a responsible step to take a definitely a necessary thing to seriously consider, as not having it can result in financial difficulty in the future. 

Insurance can be cancelled at any time, although it is advised that you keep it for the duration of your mortgage. 

We’ll consider your age, health status, your budget & all of the details of your mortgage like: how much you’re borrowing, how long you’re borrowing it for. We’ll also consider your needs & preferences & your family circumstances to make sure that we’re covering not only what you need, but what’s most important to you.

When you apply, to make a decision on price & whether or not they will cover you, insurers will consider: your height & weight, your medical history, your smoking status, the amount of cover you are applying for, amongst other things.

Ready to create a bespoke insurance plan?

Fill out the below form to arrange a call