Choosing Insurance

Although your lender may offer the types of insurance detail below, you will not necessarily need all of them.

Homeowners Insurance

This is a must - without a suitable policy you won't get your mortgage. The most basic type of insurance will cover any potential loss or damage to the actual structure of your home, whereas more comprehensive policies will also cover the cost of replacing (or repairing) belongings if they are lost, stolen, damaged, or destroyed.

Life Insurance

Lenders like you to have life insurance as it will pay off the mortgage if you die. If you are unattached and dependent-free, you don't need life cover; however, iff you have a joint mortgage and/or children, you probably do.

Critical-Illness Insurance

Critical-illness policies will pay out a lump sum if you are diagnosed as having a life-threatening or seriously debilitating conditions (such as loss of limbs/eyesight/hearing/speech, cancer or multiple sclerosis). Whether you need this type of insurance or not depends on several factors:

• the likelihood of serious illness striking before your mortgage is paid off
• what other resources you have available
• how would it affect your finances

Combined Life and Critical-Illness Insurance

The drawback of critical-illness insurance is that, typically, it will not pay out if you die within 28 days of the diagnosis of a serious illness. In order to plug this gap, many lenders sell policies that combine life with critical illness cover. If you decide you need both, combined cover tends to be cheaper.