Don't be a prisoner in your own house
Here we show how to choose the right policy at the right cost, whether it's for your home, your health, your mortgage or your motor car; You are free to go where you like for most forms of home insurance, writes Abigail Montrose
Sunday 17 August 1997
If a mortgage exceeds 75 or 80 per cent of the value of the property, most lenders charge a mortgage indemnity guarantee (MIG) fee. This is used by the lender to buy insurance against you defaulting on your mortgage payments. It is purely for the lender's benefit but paid for by you, and can add pounds 1,000 or more to the cost of a mortgage. Not all companies make this charge - notably C&G, the former building society now owned by Lloyds TSB, and Direct Line - but where they do, you must pay it.
However, other types of compulsory insurance can usually be bought elsewhere. For example, most lenders will insist you have sufficient life insurance so that the mortgage can be paid in the event of your death.
If you take out a repayment, PEP or pension mortgage, these will not include life insurance as a matter of course (unlike with an endowment mortgage) and you may well find it is cheaper buying this cover elsewhere. Check if you already have sufficient life insurance. For example, many companies offer death-in-service benefits to their workforce, and this may be enough to cover your mortgage.
If you take a repayment loan, you can keep premiums down by buying decreasing term assurance. With this, premiums are set at a fixed amount for the term of a mortgage. As you pay off the loan so the amount your policy would pay out falls - and hence the overall cost.
The alternative is level-term assurance - often described as basic life insurance. This costs more because the sum insured (the potential payout) remains the same throughout the term. So while the outstanding mortgage falls over the years, the level of cover provided by the insurance does not. If you have an interest-only mortgage, perhaps using a PEP or pension plan to pay off the amount borrowed, level-term insurance may be pushed at you.
Premiums vary hugely between insurers so you should shop around. While a pounds 3 or pounds 4 a month disparity may not seem much, over the 25, 20 or even 10 years of a mortgage, the difference is enormous. So check periodically whether you could get a better deal elsewhere.
As well as the traditional insurers, a number of direct companies such as Virgin and Direct Line sell life insurance. Or if you do not have the time to call various life insurers yourself, you can go to an independent financial adviser who will do the legwork for you. IFAs will either charge you for this service or receive commission from the life company whose policy they sell.
All mortgage lenders insist on buildings insurance - a type of cover that has become big business for the banks and building societies. In many cases you do not have to buy the insurance that lenders offer but they may charge a fee, typically pounds 25, if you go elsewhere. They justify this by claiming it costs more in extra administration as they have to check the arrangements with a recognised insurer. They also take out contingency insurance in case there is any problem with the other insurer paying a claim.
However, paying this fee may still be worth while as the savings can amount to more than 30 per cent of the premium. In fact, many insurers will pay any switching fee if you give them your business.
Direct lenders insist they can usually offer the cheapest insurance because their overheads are low and they do not pay middle men. Insurance brokers point out that they can scour the market for the cheapest deal and negotiate competitive premiums.
Your address matters most when it comes to which insurer will offer the best deal. Furthermore, live in the wrong area, such as one suffering from subsidence, and you may find that your mortgage lender offers the only deal.
Home contents insurance is not compulsory but it is advisable. Like buildings insurance, the potential savings from shopping around are huge.
The same goes for accident, sickness and unemployment insurance (ASU). Costs vary as does the cover. When comparing policies, you should check how long you have to be off work before any payment is triggered. Some do not pay for the first 30 days you are off work or unemployed, with others it is 60 days. You also need to check how long the cover lasts as it can be as low as six months.
Finding the best deals requires effort, but the savings can be enormous. If you don't have the time to spare, you can use an IFA or insurance broker and just call the direct insurers yourself.
If you are looking at special mortgage deals, it is worth checking if they are subject to your taking the lender's insurance. Moneyfacts gives this information in its monthly magazine, and also has the details on its daily mortgage fax service (0336 400239) which costs around pounds 5. Moneyfacts offers a free copy of its magazine to readers who call it on 01692 500677.
24 April 2015 07:30 PM
01 May 2015 12:00 AM
More than £60m was paid out to more than 2 million prizewinners this month
28 April 2015 05:20 PM
Why can’t we just have open and honest charges, without all the cross-subsiding?
28 April 2015 03:50 PM
With the pound at a high against the euro, it pays to buy now before uncertainty post-election
17 April 2015 06:00 PM
23 April 2015 12:00 AM
Experts disagree about the 7% increase over the past year
22 April 2015 07:29 AM
Too many mortgages are being sold with misleading gimmicks
21 April 2015 09:54 AM
The firm’s revenues slumped by a third to £217 million in 2014
21 April 2015 12:00 AM
The average quote for a buildings and contents policy has fallen by 3.6 per cent
10 April 2015 07:00 PM
15 April 2015 12:56 PM
Joining Barclays Blue Rewards costs £3 a month but then lets customers in for handouts of up to £15 a month
15 April 2015 07:27 AM
A charity is urging anyone struggling financially to see if they could get help from the state
13 April 2015 11:39 AM
Video: With an election looming, a hung parliament could hit sterling
03 April 2015 08:00 PM
03 April 2015 08:00 PM
- 1 Which country would be hardest to invade?
- 2 The man who filmed the Freddie Gray video has been arrested at gunpoint
- 4 How the language you speak changes your view of the world
- 5 Royal baby girl born: Duchess of Cambridge's second child will be a princess thanks to Queen
Over 50,000 families shipped out of London boroughs in the past three years due to welfare cuts and soaring rents
EU asylum policy is 'a direct threat to our civilisation', says Nigel Farage
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: SNP and its activists 'openly racist' towards the English, Farage says
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
Schools forced to act as 'miniature welfare states' with teachers buying underwear and even haircuts for poor pupils
iJobs Money & Business
£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...
£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...
£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...
£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...
Day In a Page
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park