When you take out a mortgage, you need to think about what kind of insurance you need and what it will cost, and factor this in from the beginning.
The main kinds of insurance that are likely to be relevant are:
Your lender will make building insurance a requirement of lending to you. This insurance will protect you against major problems such as fire, damage to your property, and flooding, and enable you to repair or rebuild the property if such problems occur.
If you live in an area at high risk of flooding then you should take particular care to ensure that you have adequate cover, as the insurance market is going through some significant changes in terms of how to manage the risks of flood insurance.
Although it may not necessarily be a lender requirement, if you have a joint mortgage, or if you have children or other dependants who live with you in the house you are buying with a mortgage, you need to think about how the mortgage would be paid if the unthinkable happened and you died.
The simplest way of protecting against the risk of the remainder of the household being unable to pay the mortgage is usually to buy life cover, which can be set up to match the size of your mortgage and repay the loan if you died.
Although it may not necessarily be a lender requirement, you need to think about how you would cover the cost of replacing the contents of your home if they were destroyed or stolen.
You can often buy contents insurance alongside building insurance. Be careful not to under-insure - when you really add up the value of everything you own, it often comes to more than you think.
There are various different types of protection insurance designed to cut in to provide an income (to help you meet your mortgage payments) if you were ill and unable to work as normal. Some of these are designed to cover relatively short periods, others are designed for the long term. Some may protect you if you get certain types of illnesses.
Although such insurance is optional, it is worth noting that the State benefit available if you get ill and cannot meet your mortgage payments is far from comprehensive - you should not assume benefits would give you adequate protection to ensure that your mortgage is paid.
There are other specialist insurances that you may come across in the course of buying a property or taking out a mortgage that may be relevant in some situations but not others. Sometimes, title insurance is used as a way of insuring against some of the risks within the conveyancing process, and some obscure insurances (such as chancel repair insurance) may be relevant for some transactions. Your conveyancer will usually advise you if such insurances are beneficial to reduce risks that you might otherwise face.
For further information about insurance of all types, visit the Association of British Insurers.