A warning for homebuyers – you might be paying too much for home insurance. A 2016 study has revealed some big problems with the way people are choosing a policy. The findings could be a big helping hand for anyone buying a home now, or in the future.
The study, by GoCompare.com, is based on responses from around 2,000 UK homeowners. It has revealed that 14% of homeowners took out their home insurance with their mortgage lender. Of this 14%, nearly half signed up because they thought it was easier and 72% had not even compared other products and prices.
One problem for homebuyers, GoCompare.com found, was ambiguity and a lack of information. From those who used the same provider for their mortgage and home insurance:
Ben Wilson, a spokesman for GoCompare.com, says these people are in a “mortgage-linked insurance trap”. They are worried that shopping around for home insurance will affect, or even invalidate their mortgage. But over the course of a full mortgage, this could add up and “cost thousands in lost savings”.
Mortgage lenders have a requirement for home insurance to cover against the likes of fires, floods, storms and subsidence. It covers the homebuyer for the cost of repairing damage sustained by these events. But, of course, this also protects the lender from lasting damage to the home and missed payment issues.
“If you have a mortgage on your home, then your lender will require you to protect your property with buildings insurance,” explained Wilson. “But it’s up to you where you buy that cover from. While buying cover offered by your lender alongside your mortgage may seem an easy option, you might find you’re paying well over the odds.”
As Wilson explains, you’re under no obligation to buy your home insurance from your mortgage lender. As is often the case, it’s best to shop around. Also, make sure the home insurance policies you’re comparing have the right level of cover for you.
There’s no doubt that buying home insurance can be complicated. GoCompare’s Frequently Asked Questions on home insurance gives some good advice to help you through the process.
Maybe we can help you? At Weale & Hitchen, we have over 25 years’ experience in buying and selling property. From free valuations to chartered surveyors, we’ve got it covered. Get in touch with your local branch for more information. We’re looking forward to speaking to you!
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