Protecting Your Family: A Guide for New Homeowners

Buying a home is usually the biggest financial commitment a household will ever make. It is also the moment when protection becomes materially important. A missed mortgage payment due to illness, or a family losing a main earner, can turn a home from a long-term plan into an immediate crisis. The good news is that the main protection products are well-understood, reasonably affordable, and fit together into a coherent plan.

Life insurance, covering the mortgage

The baseline for any household with a mortgage and dependants is life insurance that clears the mortgage on death. For a repayment mortgage, decreasing term life insurance tracks the balance and is typically the cheapest form of cover. For an interest-only mortgage or a family wanting a fixed legacy, level term is the right choice.

Joint and single policies are both available. A joint first-death policy pays out once, typically cheaper. Two single policies pay out if both people die, leaving better long-term protection for children.

Income protection, the overlooked product

Income protection pays a monthly income if illness or injury keeps you off work for longer than a chosen waiting period. It continues paying until you return to work or retire, subject to policy terms. For self-employed earners with no employer sick pay, it is usually the single most important protection product.

Even for employed earners, sick pay eventually ends. Income protection picks up where it stops. Premiums depend on occupation, age and benefit level, typically 50–65% of pre-tax income.

Critical illness cover

Critical illness cover pays a lump sum on diagnosis of a listed serious illness, cancer, heart attack and stroke being the big three, alongside dozens of others. The lump sum can cover the mortgage, fund time off work, adapt a home or pay for private treatment.

Critical illness is often added to life insurance as a combined product. Definitions and policy wordings vary significantly between insurers, your adviser will compare them so you get meaningful cover, not just the cheapest.

Buildings insurance

Buildings insurance is almost always required by the lender and must be in place from exchange of contracts, not completion. Cover is based on the rebuild cost (usually lower than market value), not the purchase price. Combined buildings-and-contents policies are often cheaper than two separate policies.

Pulling it together

The right combination depends on your income, dependants, employer benefits and budget. An adviser can map these in an hour. The usual priority order is: income protection, then life cover, then critical illness, with buildings insurance required separately. Writing policies in trust ensures payouts reach beneficiaries quickly and can sit outside your estate for IHT.