In part 1 (link below) I gave an overview of the types of brokers that are available for you to consult with about your residential property insurance needs as well as a general breakdown of insurance into Life and General Insurance products. All I would ask is that you review that section with regard to the different types of broker, especially prior to buying insurance.In this second part of a series of three I will give a very general overview of the general insurance that is available for residential housing for both owner occupier and landlord.
In general these types of insurances are 12 month contracts that are paid for in one lump sum or in monthly instalments, which are renewed annually. Be aware though that some can be 2 year contracts but these are not common. Some policies are cheaper if paid for in one lump sum up front as the company saves money that way.
The first and most obvious of these types of insurance is buildings insurance. You would be most unwise not to have this most basic of cover and, if you are taking a mortgage, having this cover is a requirement of having the loan. But remember, you do not have to take out the insurance with your mortgage provider or broker. You may find better or cheaper cover elsewhere. Allied to this is contents cover. You can get joint buildings & contents policies or they can be separate. Make sure you set a realistic cover amount though or you may find yourself out of pocket when claiming.
For Landlords make sure you get specifically designed cover, which by its nature is a bit more expensive. Doing it on the cheap with an ordinary policy may well void it and leave you without cover at all. Here you can also buy cover for rental void periods, but this is pricey so you have to work out the risk / cost profile for yourself.
When considering buildings and contents insurance ensure you understand all the benefits, have factored in all your belongings and also are fully aware of the excesses you have to pay prior to the company paying out.
The next insurance of this type is Mortgage Payment Protection Insurance (MPPI). It will pay out should the insured be unable to work due to an accident, sickness or unemployment. This is designed to pay up to 125% of your monthly mortgage payments so it covers all housing related costs such as the mortgage, endowment costs (if used), buildings and contents cover premiums as well as the MPPI premiums themselves. Once again, shop around for this as the price varies greatly. Be aware it will not pay out for pre-existing conditions or where threat of redundancy is known prior to taking the policy out. Although more rare these days, there is a policy where the cost is paid in one lump sum and added to the mortgage. This is generally extremely expensive so check it out thoroughly before agreeing to it as you will also be paying interest on it.
Another insurance policy that is akin to MPPI is Accident, Sickness and Unemployment (ASU) cover. It generally has the same features as MPPI but is not restricted or linked to a mortgage. This will cover up to about 75% of your normal monthly income with a maximum limit (Â£2000-Â£2500). It may also offer a lump sum on losing a limb or eyesight for example. This can therefore be used to cover mortgage and / or household expenditure up to a point.
There are other sorts of general insurances such as hospital cash plans, private medical insurance and personal accident and sickness insurance. These though are not directly housing related.
General insurances are subject to Insurance Premium Tax (IPT), which is included in the premiums. They attract no tax relief but the benefits are paid out free of tax.
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