BUILDINGS INSURANCE

When a mortgage is arranged, the lender will require that Buildings Insurance protects against fire, damage or destruction of the property over which the lender has a charge.

Although lenders offer buildings insurance, their premiums are not always the most competitive, and so it might be preferable to seek alternative quotes elsewhere.

If the property is purchased freehold, it is usually your, the freeholder's, responsibility to arrange the insurance.

If you are purchasing the property leasehold, it is usually arranged for you by the freeholder, although you will be expected to bear a portion of the premium.

If you are purchasing a freehold property, the fire insurance should be put in place from the date of the 'exchange of contracts'.

The sum to be insured is usually less than the market value of the property, and the land combined, as the value of the land will remain even if the buildings are destroyed.

The premium is reviewable each year.

CONTENTS INSURANCE

In the event of loss, damage or theft, it is wise to have the value of your more expensive items covered, ie furniture, valuables, televisions etc. Depending upon the level of cover, some will include accidental damage and loss to items when taken outside the home, eg portable CD players.

It is usually necessary to specify valuable items, otherwise they may not be covered.

TERM ASSURANCE

In a similar way that the lender's security in the value of the property is at risk in the event of the total destruction of the property, the lender pre-supposes the continuance of the borrower's life to pay off the sum borrowed. Whilst this usually happens without any problems, there is always a risk that the borrower may die before the end of the mortgage period.

In order to provide a lump sum which will pay off the capital borrowed, the lender will usually like to see in place Term Assurance which will cover the loan or mortgage.

Term Assurance will then pay back the sum borrowed (or mortgage) in the event of the earlier death of the borrower.

No - Term Assurance has no growth potential and no surrender value. At the expiry of the policy term, the policy will cease without any value.

The premium, which is usually low, will be guaranteed usually throughout the life of the policy, and it will not increase.

There are variations on Term Assurance - please refer to Life Assurance.

However, premiums vary enormously between different providers for the same level of cover, so we will obtain the most competitive quotations from leading life companies.

ACCIDENT, SICKNESS AND UNEMPLOYMENT INSURANCE

When your property is covered by Fire Insurance and your loan is covered by some kind of Term Assurance, you need to feel safe in the knowledge that the premiums and the mortgage payments will be covered in the event of your income suddenly ceasing.

When after six months (26 weeks), your salary from your employers may cease, you will be restricted to Statutory Sick Pay of £60.20 a week for 2 weeks (illustrated at the lower rate), followed by Incapacity benefit of £50.90 a week (illustrated at the short term lower rate).

The amount of benefits are shown only as a guide. Whilst the rates are correct as at October 2000, changes in the law may make them become gradually less accurate. The rules for benefit mean that your individual circumstances may affect the amount that you can get.

This cessation of income might come about because you are unable to work, whether this is because of an accident, long-term sickness, or unemployment.

There are various insurances on the market which will provide a substitute income for differing lengths of time, and with or without a return of the premiums where no (or only small) claims have been made during the policy's life.

Premiums differ considerably for an identical level of cover and period, and so we will obtain a range of quotations from competing companies for your consideration.