Home Buyers Guide

Chapter 8: Insurance

Insurance for home owners...cont:

You do not have to insure the house for the full purchase price – simply what it would cost to replace the house if it was destroyed.

This is called the replacement value.

The mortgage valuation report completed for your lender will specify what the replacement value should be.
When taking out a house insurance policy, the lender will need their interest in the house to be noted on the policy and most lenders will also require a ‘letter of indemnity’ from the insurance company.

Serious Illness Cover

Serious Illness cover is designed to pay off the mortgage if you suffer from a specified illness covered by the policy.

(Your insurance company will give you a list of the illnesses covered). It can be built into your mortgage protection policy or taken out as a separate policy.

After having a heart attack, for example, your mortgage would generally be paid off under this type of policy, even if you fully recover.

Your lender does not require you to take out serious illness cover but it is great insurance to have if you can afford it.

Let’s face it, if you suffer from a serious illness and cannot work, paying the mortgage would be much more difficult.

Contents Insurance

Most insurance companies and brokers can offer you a joint policy for both the contents of you house (such as your TV, stereo equipment etc) and the house itself, which usually works out cheaper than taking out two separate
policies.

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