Like most other insurances, a building insurance is not compulsory in the UK. However, if you acquire a building through mortgage, your mortgage financier might obligate you to take up either; an insurance policy for the building under mortgage and insurance for the building you provide as collateral for the mortgage loan.
This is to cushion against possible defaulters of the mortgage plan and the insurance has to equal the amount of the mortgage loan. It is the mortgage payment protection.
This building insurance in the U K covers damage of the main structure of the building. It covers damage due to disasters such as fires, collapse, vandalism, explosion, storms, floods, objects hitting your building, theft from the building and earthquakes.
However, info from your insurance agent in the U K is always invaluable when in doubt about exactly what damage the insurance will cover. For mortgage homes, federal laws in the U K may require you to buy a flood cover insurance policy. Nevertheless, for all the other damage risks, you can take up a cover policy against any of your choice from a building insurance provider in the U K.
Flood insurance is particularly critical to buildings constructed along flood prone areas and coastal strips in the U K. Law instructs that such buildings must be under an insurance cover. Banks would also hesitate to offer loans towards construction of buildings on such areas if the loan is not protected by an insurance policy.
However, good to note here is that the full payments towards mortgage debt are paid to the mortgage company including monthly payments towards the insurance. The mortgage company in turn pays the insurance company.
Mortgage Repayment Protection in the UK
This is basically what mortgage providers will be aiming when obligating the mortgage customers to take up mortgage insurance. The mortgage holder may find it hard to pay the mortgage loan and thus the insurance takes responsibility.
This inability to service the loan might be due to prolonged sickness or generally inability to work and hence unable to generate income to repay the mortgage. A specific policy also available in UK building insurance is Life Insurance mortgage protection. It is designed to pay off mortgage dept in case of the policy holders death. This insurance policy will cover a specified amount of your mortgage dept.
As aforementioned, it is always critical to consult your insurance broker to give you guidelines specific to your building insurance needs.