QUESTION 3:
How much is it going to cost me?

ANSWER:
It won’t be cheap – though shopping around can easily bring high premiums down to earth. At the moment a decent policy will probably cost around £5 a month for every £100 block you want paid out after a claim. So protecting the £700 mortgage mentioned earlier will cost £35 a month. Finding a low cost provider may take some time, however. Many people buy the in-house policies offered by their mortgage companies and several best-buy lenders like Abbey, Bristol & West, Britannia, Nationwide and Skipton building societies frequently offer to pay the first three or six months of premiums for their new borrowers. But experts say you should always shop around for a better deal. ‘Our advice is simple: Never take your provider’s own cover. Shop around because a stand-alone policy can slash your bills,’ says Paul Schofield of Insure Supermarket which constantly compares policies and prices. A host of new players from the Post Office to the British Insurance Brokers Association now offer policies which normally undercut those from the big banks. Financial researcher Moneyfacts says a typical policy costing £36 a month from an expensive provider can cost less than £10 a month from a best-buy alternative. ‘Premiums vary hugely and the new players are proving that cover can be provided for considerably less than has been the case with established providers,’ says Andrew Hagger of Moneyfacts.