Almost half a million homeowners that have bought home insurance with their mortgage provider are unaware they can switch, new research shows.
According to a survey by Gocompare.com, 30% of homeowners (466,200 households) believe their home has to be insured with their mortgage lender as a condition of the loan.
Worryingly, 12% say they felt under pressure to buy their lender’s home insurance, while 6% said they were told by their mortgage provider that they had to.
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.
Statistics published earlier this year by the Association of British Insurers show the main reasons for household insurance claims being rejected include the claim value being below the policy excess and the incident not being adequately covered by the policy.
Ben Wilson, from Gocompare.com Home Insurance, said: “We were shocked to find that so many people still think that their mortgage offer is conditional on buying their lender’s home insurance, and that a significant minority are essentially in a mortgage-linked insurance trap – believing that switching away from their lender’s insurance will invalidate their mortgage.
“We were also concerned that a handful of lenders could be exploiting their relationship with their customers by pushing them to buy their insurance cover.
“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. While buying cover offered by your lender alongside your mortgage may seem an easy option, you might find you’re paying well over the odds. And over the lifetime of a mortgage, failing to regularly shop around for a good deal on home insurance could cost thousands in lost savings.
“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.”
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