Insurance When Buying a Home

Buying a home, whether your first or the latest of many, is a huge commitment. It is essential to consider insurance when buying a home to protect your investment.

It’s probably the biggest asset you will own. It likely holds the possessions you value most. If you have a mortgage, there is also a financial commitment.

If you have a family, you owe it to them as well as yourself to protect your home as much as possible. That’s why getting the right insurance when buying a home is vital. Especially in the earlier part of your property ownership journey, your costs are probably at their highest.

There are many different types to choose from, so research is key. As is being realistic about all you need to consider before taking the plunge. Let’s start – there’s a lot to get through!

Before buying a home

When buying a new home, consider using the same estate agent to sell your current home. This keeps everything under one roof, making the process smoother and potentially more cost-effective. Your agent can coordinate both transactions and can simplify communication. Check to see if the estate agent has Propertymark accreditation to ensure they meet high professional standards.

What insurance do I need when buying a house?

There are several types of insurance you should look into when buying a house. Beyond insurance, consider other forms of protection too like a home buyers survey to identify any structural problems.

Below we dive into the different types of insurance, what they mean and the level of cover. We cover things like Buildings Insurance, Contents Insurance, Life Insurance, Homebuyers Protection Insurance.

Buildings Insurance

You do not have to have Buildings Insurance by law. However, most mortgage lenders require it when you exchange contracts and take legal responsibility for the building.

It is insurance that pays for repairs or rebuilding. This happens if there is serious damage to the building or its fixtures. Events like fire or flood can cause damage.

Insurance policies vary slightly among providers, so make sure to check what they include. Most will cover damage or destruction of walls, windows, flooring, roofs and so on. It also covers damage to outbuildings and greenhouses.

It includes permanent parts of the home, like fitted kitchens. And of course, it will cover rebuilding should the whole home be destroyed.

Such disasters are rare. However, not having home insurance means that anyone whose house burns down must pay for rebuilding or buying a new home. They would have no financial safety net.

One point often overlooked is how Buildings Insurance affects a leasehold property. For example, one flat in a block or house which contains several other flats. In this case, you will still need Buildings Insurance but usually, the freeholder arranges it for all of the homes within the block or house. The property manager will bill individual flat owners for their share of the overall Buildings Insurance bill.

Home Buyers’ Protection Insurance

This is a less well-known type of insurance and as its title suggests, it relates specifically to costs you may incur – and lose – during the home-buying process.

Some 25% to 30% of property purchase falls through at some point, often after a buyer pays for things like a survey or conveyancing. So, it might be worth getting a home buyer insurance.

Different levels of this insurance cover different abortive costs. If the seller pulls out, this insurance can cover expenses you’ve already incurred, such as conveyancing fees, valuations and survey costs, and mortgage application fees.

If another buyer makes a higher offer that the seller accepts over yours (gazumping), this insurance may cover the costs you’ve incurred up to that point.

A key element to check here is how long the Home Buyers’ Protection Insurance cover lasts. Some policies last up to 180 days but many last for significantly shorter periods. It’s crucial to secure it as soon as possible after you’ve received a written offer acceptance for the house you’re buying. Aim to purchase this insurance shortly after your offer is accepted and before you start incurring significant costs such as conveyancing fees, surveys, and mortgage application charges.

Contents Insurance

This is what it says on the tin – insurance for the contents of your home.

Many individuals regard this as insurance against theft and consider that it is unlikely they own anything ‘worth stealing’. But this type of insurance also covers you if household items are damaged or destroyed in a flood or fire.

If you add up the cost of replacing lost contents with new equivalents, the figure may well be higher than you anticipate.

Many insurers link buildings and contents insurance and sell them jointly. They are available separately if you want to shop around for the best deals.

Accidental damage cover is typically an optional addition to both buildings and contents insurance policies. It covers unintentional damage to the property or its contents—this might include spilling wine on a carpet or a DIY mishap that puts a hole in a wall. Not all standard policies include accidental damage, so you often need to add it explicitly.

Life insurance

No one wants to think about a tragedy, but life insurance protects your loved ones with financial support if you pass away.

This type of insurance could be for spouses or partners jointly, or for individuals. You can select how long the policy would last – for example, for the duration of a mortgage.

Typically, a life insurance policy pays out a cash lump sum upon the death of the person covered.

Everyone has different criteria for selection, but insurers suggest that people with relatively modest savings, which by themselves may not provide any spouse or family sufficient financial help, often purchase life cover.

Critical illness insurance

Critical Illness Insurance pays you a lump sum if a doctor diagnoses you with a condition specified in your policy.

Individuals typically use this when they cannot work or expect to earn only for a short period before the illness worsens.

This type of insurance is not open to someone already suffering from a condition. Its main purpose is that it serves as a safety net. It offers peace of mind that you, or a family member, can have enough money to pay a mortgage or other household costs (even medical fees) if you are unable to work.

Policies allow substantial choices as to which conditions to include, and the term of the cover. So, make sure to do your research.

Mortgage Payment Protection Insurance (MPPI)

Mortgage Payment Protection Insurance also known as MPPI, is specifically designed to cover your mortgage payments. In the event that you’re unable to work due to illness, injury, or unemployment.

People also call this protection mortgage life insurance. It can cover your family members if you pass away before paying off your mortgage.

This targeted form of insurance ensures you continue to pay your mortgage under certain circumstances. Coverage is usually for a fixed period, commonly up to 12 or 24 months, and starts after a waiting period (also known as a deferral period), which can typically be 30, 60, or 90 days after you stop working.

Income Protection Insurance

Income protection insurance sounds similar to critical illness insurance but it differs in one important respect. An income protection insurance can offer long-term regular payments. Typically, between 50% and 65% of your usual income, for an extended period should you be unable to work because of illness or accident.

Depending on the policy, it can pay out for some years, until you can return to work or until you retire.

The choice of policy will include different so-called ‘deferred periods’. That is, how long after you are obliged to stop work can you wait before claiming income protection insurance.

Some policies allow you to claim for about four weeks, but others have deferred periods of up to six months.

Which you choose will probably depend on what savings you have, the scale of financial commitments you have (such as a mortgage), and how much you are prepared to pay for the insurance. Naturally, the shorter the deferred period, the higher the insurance cost.

Income protection insurance is similar to Mortgage Payment Protection Insurance. However, the main differences are in coverage and duration. A MPPI only covers your mortgage payments.

In contrast, Income Protection covers part of your earned income. You can use this income for mortgage payments, bills, or other living costs.

An MPPI usually has a shorter benefit duration, typically around 1-2 years and it often includes unemployment coverage. Income Protection Insurance does not typically offer this.

Indemnity insurance

So, what’s indemnity insurance? This is a form of cover used to protect home buyers in certain situations, usually, if there’s a legal defect with the property. This could be missing paperwork, restrictive covenants or lack of planning permission. Once bought, this cover applies to the property and can be passed to new owners.

Navigation your home insurance options

Now that you know the different types of insurance for buying a home, you can decide what coverage you want or need. Buying a house is a big financial commitment. Being prepared is important to protect your investment.

There are many other types of coverage. These include home emergency cover, accidental damage, when keys are lost, alternative accommodation, and trace and access.

These can be either part of a comprehensive home insurance policy or available as optional add-ons. The insurer and the type of policy you choose determine what is included in your insurance. So, make sure to always do your research on the best home insurance for your personal circumstances.

Before you buy your property, it’s important to know you’re moving to an area you’ll love.

Phil Spencer’s property report allows you to look up details and find useful information concerning the local area. Remember, where you live is just as important as the house itself!

Last Updated: March 19th, 2025