Should you buy your mortgage provider’s home insurance?

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Thousands of people all over the UK take out a mortgage with the bank they use for their everyday needs, as well as the home insurance they’re offered along with it.Home Insurance

Their reasons for doing so are often because using the same bank for pretty much all their financial requirements is the route of least resistance and, additionally, many don’t feel comfortable dealing with other financial organisations.

A home buyer or homeowner may be quite happy with their bank and feel that any financial deal they’re offered by it, while not being necessarily the best available, will be close to it, or at least reasonable.

Misplaced trust can mean higher costs

Crucially, many people have been with the same bank for years and have a great deal of trust in it. However, such attitudes to financial organisations can end up costing consumers a considerable amount of money.

Not only might they be paying well-above the odds on their mortgage compared with what’s available from equally trustworthy and secure mortgage providers, they may also end up paying far more than necessary for their insurance.

Cover and home loans go hand in hand

That’s because banks, building societies and other mortgage providers nearly always offer home cover at the same time as a home loan. To an extent they have a ‘captive audience’ because protecting a home with insurance is a legal requirement made by all mortgage companies.

In other words, the bank knows you have to have home cover, and knows you know you have to have home cover, and so they entreat you with lots of information about the home insurance they provide.

Remember, you can shop around

This is often in association with third party insurers who provide the cover on the bank’s behalf, but however the cover is provided, it certainly may not be the best deal you can get. In fact, it could end up costing a homeowner or home buyer hundreds of pounds a year more than if they’d checked with other insurers, perhaps via an insurance broker or online comparison site.

Remember that you don’t have to take out cover with the same lender that’s providing you with the home loan, although many people think they do.

1.5million homeowners assume they must buy their bank’s cover

Recent research from Sainsbury’s showed that 1.5million homeowners wrongly thought they were obliged to accept whatever insurance their mortgage lender offered.

Until a couple of decades ago this used to be the case, but the Office of Fair Trading ruled the practice was anti-competitive and subsequently allowed consumers to get their cover from whichever provider they chose.

Get a number of quotes from different providers

So whether you’re buying a home for the first time or are re-mortgaging an existing property, here’s what you should bear in mind when it comes to insuring it:

  • It’s often the case that the deal your mortgage provider offers won’t be the best you can get. In fact, it could be a long way from being the best.
  • Remember that you can say ‘no’ to your bank as you don’t have to accept the ‘deal’ they offer you.
  • Make sure you shop around to get different quotes from different sources. In particular, consider using a broker as you’re more likely to get the correct cover for the home you own or are buying.
  • If you like the idea of getting cover through your bank, but they don’t offer a competitive deal, point out other quotes to them to see if they’ll reduce the price of theirs.
  • Talk to an independent broker if you’d like to receive advice.

Policy Expert

If your home is your haven, you’ll want it to have the best protection. Compare quotes from our range of handpicked insurers and tailor a policy to suit you. For more information speak to one of our experts on 0330 0600 600 or email ask@policyexpert.co.uk

The views expressed here are solely those of the author and do not necessarily reflect the views of Policy Expert.