Insurance and Legal Info
Detailed below are explanations of insurance and conveyancing – things you will need/come in to contact with during and after buying your property.
Home Insurance
Home insurance is a short term policy which is used to protect your home and possessions. Regardless of what's being insured, the insurance company will assess the risk particular to you (factors include your age, previous number of claims, local crime rates, flooding areas, age of the home, etc) and quote you a price accordingly.
Life insurance
Life insurance pays out at the end of a term. Assessing risk is far harder with life insurance; while an existing health problem may force you to pay higher premiums, little distinction is made between healthy and unhealthy lifestyles (although this is starting to be built in to some policies).
Borrowing for a mortgage is a huge commitment and the purpose of life insurance is to lessen the impact of loss of income, inability to cover debts or tax liabilities that would affect your family should you die.
There are two main types of life insurance:
- Term insurance enables high levels of cover for a low premium. It will cover you for a set term for 25 years or more and may be used to cover periods of high exposure such as mortgage payments or children growing up. When the period expires no payout is made (assuming you are alive) and there is no surrender value.
- The second main type is whole life insurance. This covers customers for their whole life until they die. Premiums on these kinds of products are higher since they are guaranteed to pay out eventually (unlike term insurance).
Payment Protection Insurance
Whether it be due to sickness, redundancy or accident, Payment Protection Insurance (PPI) will protect a borrower's mortgage payments against these unforeseen eventualities that inevitably result in a vast reduction in a mortgage payer's ability to make their monthly repayments.
Offered by most mortgage providers, PPI will mean that your monthly repayments will be paid for a set period of time, usually between 18 months and two years.
Conveyancing
Another important necessity once your property has been chosen is the legal act of transferring your new property from the person selling it, into your name - a process known as conveyancing.
This process is overseen by solicitors where a contract is signed by both the buyer and seller. A deposit is usually be put down, which will not be refunded if you decide to opt out of the purchase. A draft property transfer document will then be arranged, which again is signed by both the buyer and the seller and your solicitor may put the finishing touches to your mortgage documents.
The Financial Services Authority (FSA) believes that paying for such a process will cost at least £400.