There are various types of insurance you may require if purchasing a property to live in or invest in
- Lenders Mortgage Insurance (LMI)
- Home & Content's Insurance
- Income Protection Insurance
- Landlord's Insurance
Lenders Mortgage Insurance (LMI)
All lenders have limits on how much they will lend you. This will depend on the size of your deposit, the value of the property, and your servicing capacity (based on your income, and how much you are able to repay).
Normally, if more than 80% of the value of the property is required as the loan amount (60% if you're self-employed and seeking a Low Doc loan), then the payment of a once-off Lenders Mortgage Insurance (LMI) charge will be payable. This Lenders Mortgage Insurance cost can be added to your loan amount so it doesn't cost you anything upfront.
Mortgage insurance will often cost more than one per cent of your property value. This insurance doesn't insure you - it insures the lender against the risk that you may not be able to repay your loan.
The advantage of LMI is that you can buy a property with a smaller deposit.
Home & Content's Insurance
Protecting your home
Your home is one of your most important assets, if not the most important one. Home building insurance protection will ensure that if the worst should happen, you'll have the money you need to rebuild or repair damage.
When you purchase a property and take out a new loan, the lender will require the property to be insured. This can be insured by any insurer and is your cost.
Protecting home contents
Contents within your home (eg. furniture) can be protected by insurance, with new-for-old replacement on damaged or stolen items, plus a range of other types of additional cover (eg. cover against the fraudulent use of a stolen credit/ATM card). You can also choose to cover items you take on holiday - like cameras and sporting equipment.
Income Protection Insurance
Income Protection is a monthly benefit that generally pays you up to 75% of your income and covers you for accidents, illnesses or major traumas. It pays you up until you return to work (after your waiting period), if you are unable to return to work, up until retirement age being age 65 (depending on your occupation). Income protection is tax deductible and is designed to ensure that you can continue to pay the mortgage, pay for essentials such as food and other costs of living, and carry on financially until you return to work.
Landlord's insurance protects both your property and the revenue it generates by covering a certain period of rental payments (eg up to 15 weeks of rent), and up to six weeks' rental default if tenants leave without notice. Malicious damage and legal expenses are also covered.