Is Your Home Insurance with your mortgage provider? Did you know you can switch to save money?

If you are one of the 1.6 million homeowners have bought home insurance from their mortgage lender, a new study has foundmany mistakenly believe they cannot switch for a better deal.

The survey by Go Compare found 30% (466,200 households) believe their home has to be insured with their mortgage lender as a condition of the loan; and that 6% were told by their lender that it was a mandatory purchase. Nearly a quarter (24%) think switching away from their lender’s insurance will invalidate their mortgage.

 Worryingly, 12% said they felt under pressure to buy their lender’s home insurance.

Protecting a property with adequate buildings insurance – typically against fire, flooding, subsidence and storm damage – is as a requirement made by all mortgage lenders.  Buildings insurance provides financial protection for the borrower (and ultimately the lender) from damage to the main structure of the home.  While most lenders offer home insurance, borrowers are not obliged to buy it for them.

The practice of compulsory home insurance tied-in mortgage deals was never formally outlawed despite promises to do so in the late 1990s.

Whether you are arranging your first mortgage, re-mortgaging your home, or a long-standing mortgage-holder, you can shop around for your home insurance to find the best deal.

Why buying mortgage lenders’ home insurance might be the wrong policy

The survey also revealed that just over a third (34%) of homeowners who arranged cover through their lender didn’t check cover levels and excesses to make sure they were buying the right policy.  According to statistics published earlier this year by the Association of British Insurers, the main reasons for household insurance claims being rejected included the claim value being below the policy excess and the incident not being adequately covered by the policy.

If you have a mortgage on your home, then your lender will require you to protect your property with buildings insurance.  But it’s up to you where you buy that cover from.

As well as finding a good value policy, you also need to make sure it covers all the things that are important to you, plus any minimum cover levels your lender may require, and comes with excesses that you can afford