Buildings insurance is the only cover a lender can require. Everything else is your choice. That said, taking on the largest debt of your life is a sensible moment to look at what would happen if you could not pay it — and the order you buy protection in matters more than most people realise.
What your lender can and cannot insist on
Buildings insurance is compulsory. Your lender will require it from exchange, and will not release funds without evidence of it. On a leasehold flat it is usually arranged by the freeholder or managing agent and paid through the service charge.
Everything else is optional. Life cover, critical illness, income protection and contents insurance are all your decision. A lender may recommend them; it cannot make them a condition.
You do not have to buy protection from whoever arranges your mortgage. Some people prefer to keep it together, which is reasonable. Others shop separately. Either is fine — the important thing is that you know you have the choice.
The order to buy it in
Most households have a limited monthly budget, so sequence matters. Our usual order of priority:
1. Income protection. Covers the widest range of circumstances — almost any illness or injury that stops you working, including back problems and mental health, which are the two most common reasons people are signed off long-term. It replaces the thing that actually pays the mortgage. See income protection insurance in Leicester.
2. Life cover, if anyone depends on you. If you have a partner, children or anyone who would struggle financially, this is essential and it is the cheapest of the three. If you live alone with no dependants and the property would simply be sold, it may genuinely not be needed.
3. Critical illness cover. Pays a lump sum on diagnosis of a listed condition. Valuable, more expensive, and narrower than income protection — it will not pay for the majority of reasons people stop working. See critical illness cover in Leicester.
This order surprises people, because life cover is usually what gets discussed first. But you are statistically far more likely to be unable to work for a period than to die during the mortgage term.
Check what you already have
Before buying anything, find out what exists:
- Death in service through your employer, commonly two to four times salary
- Group income protection, provided by some larger employers
- Contractual sick pay — read the contract rather than assuming
- Existing policies from a previous mortgage, sometimes still running
Employer benefits usually end when the job does, so they protect the role rather than you. But they should still shape how much you buy, and they may change the deferred period on income protection substantially — which is the biggest lever on cost.
Two things worth getting right
Write life cover in trust. It normally pays out faster and outside your estate. It costs nothing. See putting life insurance in trust.
Cover the non-earning partner too. A household where one partner cares for children full time would face real costs if that partner died — childcare, reduced hours, possibly stopping work. The sums may differ, but it should not be zero.
Do not just insure the mortgage
The most common approach is decreasing term life cover matched to the mortgage, and nothing else.
It clears the debt if you die. It does nothing if you are alive and unable to work, which is the more likely scenario — and in that situation the mortgage still needs paying every month.
If budget only stretches to one product, income protection covers more eventualities than anything else.
When to sort it
Ideally alongside the mortgage application, so cover starts at completion. There is no benefit to arranging it earlier, and a real risk in leaving it later — people intend to sort it out after moving in, and then do not.
Note that protection is underwritten separately from the mortgage. If there is anything in your medical history that might take time, start earlier rather than later.
Talk it through
We will look at what you already have before recommending anything new, and we will tell you plainly if you do not need a product.
Call 0116 277 7536 or book a free consultation.
More guides: protection guides for Leicester.
