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First-time buyer insurance

There are a few different life insurance options available for first-time buyers. Our guide covers what you need to know.

Choosing between life insurance products after buying your first home

There are a few different insurance products available and worth considering as a first-time buyer. Depending on your provider, you might be able to add on extra policies too.

  • Mortgage insurance
    Mortgage insurance is designed for paying off your mortgage balance. If you have a repayment mortgage (where the amount goes down over a set number of years), this is a good option. The payout must be used to clear the mortgage debt. The amount you owe the mortgage company decreases over time as you get more equity in the property. This kind of insurance means you’ll be paying out less money over time. Say you passed away in the first year of the mortgage. Your dependents would receive a bigger payout. But if it happened at the end of the agreed term, they could receive enough to pay off the remaining debt.

  • Term life insurance
    Term life insurance gives you cover for a specific number of years. If you passed away in that time, your dependents would get a payout. When applying, you choose how much cover you want. It often costs more than mortgage insurance. But it would mean your dependents receive a bigger payout whenever you passed away. They’re free to use the money on anything they want. It could be used to pay other debts.

  • Whole of life insurance
    This is like term life insurance. But it means your loved ones receive a payout if you passed away at any time in your life.

    There are other kinds of cover to consider as a first-time buyer. Such as serious illness cover. Which means you would get a payout to help with medical treatment if you became sick. There is also income protection insurance. Where you’d receive a payout if you couldn’t work for reasons covered by the policy. It may be possible to add on extra cover to your life insurance policy.  Mortgage lenders might recommend various kinds of insurance to you too. It’s always worth doing some research of your own to find the right deal for you. 

Do I need life insurance after buying my first property?

You are not legally obliged to take out life insurance as a first-time buyer. But there are several benefits to doing so. Some mortgage lenders will need you to get life insurance in accordance to their individual policy. This will likely differ depending on which mortgage lender you go with. The benefit of taking out life insurance as a homeowner is that it would payout if you passed away. If the worst happened before paying off the mortgage, this debt would be passed onto your dependents.

If your dependents couldn’t make the mortgage repayments, they’d have to sell the property. But, having life insurance to cover your mortgage means the provider would payout and your loved ones could then own the property outright. That means they could stay in the family home. Dependents include but aren’t exclusive to your partner, children or anyone else who relies on you, such as an elderly relative. If you’re single and bought your home alone, you might not need this cover. If you passed away, the mortgage provider would reclaim the property. They’d then sell it on. 

Do I have to take out life insurance through my mortgage provider?

Sometimes mortgage providers will offer you a mortgage on the condition that you take out life insurance. They might then suggest their in-house cover. You don’t
have to use their option. You can shop around and find the best cover for you. 

When should I buy it and how long for?

If your mortgage provider has told you that you need life insurance, ask them what date you need cover from. It may be a good idea to get life insurance from the date you move in for peace of mind. It means you’ll be protected if unfortunately, something does go wrong. 

Remember that life insurance products are normally cheaper the younger you are. If you bought your first home aged 35 and took out life insurance then, it’d cost a lot less each month than if you did so aged 45. If you bought the property while you were single, you might not have needed life insurance to start. 

What happens to my mortgage if I pass away?

If you pass away before you’ve paid off your mortgage, a few different things could happen. First, your loved ones would need to contact the mortgage provider and
provide a death certificate. If you have mortgage insurance, the insurer will pay off the remaining debt to the mortgage provider. Your dependents can then live in the property without paying anything more. Or, if you have term life insurance, the insurer would pay out a sum to your named beneficiary. If you don’t have term or whole of life insurance, your loved ones may have to pay off the debt in some other way. If they couldn’t afford to pay, they would have to sell the property. 

What do I need to get a first-time buyer’s life insurance quote?

If you’re ready to get a life insurance quote to cover your first property, you’ll need to provide the insurer with a few details. In many ways, the application process is like term life insurance. You’ll need to provide details about yourself such as the required policy term and your health.
But if you’re getting cover for your first home, you’ll need details about the mortgage. The insurer will want to know about the mortgage term (how many years before it’s paid off).

They also need to know about your mortgage interest rate. They might ask about your salary too. This information will help them calculate how many years you’ll need cover for. It also lets them see how much the debt will go down each year. All of which helps them to calculate your premium. First-time buyer insurance isn’t the only cover to think about when buying your new property. You might also want to consider contents and building insurance. Income protection and serious illness insurance also payout in case you can’t work. That means you can keep making mortgage repayments while not earning. 

Relevant guides and articles

  • Mortgage protection insurance guide

    Mortgage protection is a type of life insurance that pays off your mortgage should you become unable to make repayments. Read more in our guide.

  • Term life insurance guide

    Thinking about life insurance? Find out everything you need to know about term life cover and whether it suits your needs in this guide.

  • Whole of life insurance guide

    Whole of life insurance guarantees a payout to your loved ones when you die. Find out how this cover can protect your family's financial security.