Exchange of Contracts – Insuring Yourself Against Things Going Wrong
It seems rather unfair that, even though you won’t actually be living in the home you’re buying until you move in on the day of completion, as the buyer you are legally liable to take out buildings insurance from the date you exchange contracts. So if the building burned down in the weeks (usually 2) between exchange and completion you wouldn’t end up living in a tent amongst a pile of smouldering rubble.
But apart from buildings insurance (which your mortgage lender will insist you have in place before exchanging) there are other types of cover that may – or may not – be worth considering.
Profit-hungry banks know very well that when people are moving house they can be receptive to being sold all kinds of financial ‘products’. A few extra quid spent here and there can seem like small beer when you’re dealing in hundreds of thousands’ worth of property.
These are the most common types of additional cover:
* Contents insurance
Contents cover is always advisable, but some policies have limitations, eg where you have lodgers. Check also whether your possessions are covered during transit, and ask your removal firm for a copy of their policy.
* Accident, sickness and unemployment (ASU or PPI)
Everyone now knows that many PPI policies in the past turned out not to be worth the paper they were written on. So guess what – the name has been changed, so no one calls them PPI any more! Whatever they’re now branded as, these policies have been heavily criticised for loopholes and severe limitations on payments, so are best avoided.
Some policies will not pay out just when you need them most, for example if you resign from your job or if you’re sacked. It’s possible that your employer may already cover you, making any new policy unnecessary.
* Critical Illness
If you were unfortunate enough to contract a debilitating illness such as cancer, or have a stroke or a heart attack, so that you couldn’t work, this insurance cover would pay off your mortgage. Again, check the small print for limitations and exemptions.
* Permanent Health Insurance (PHI)
This should pay at least half your salary for a limited period, in the event that you become unable to work. But some employers automatically provide this, so you may already be covered.
Our next blog – coming soon …….
What happens between exchange and completion?
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