Two-thirds of homeowners fall for this insurance myth when buying - costing them hundreds of pounds
Two-thirds of homebuyers are duped into purchasing insurance policies they don't need, costing them hundreds of pounds each year, new research has shown.
Homebuyers are being mis-sold life insurance or income protection cover after being led to believe they need it in order to get a mortgage.
According to research by Money Mail, more than three in 10 homebuyers have been told life insurance is a legal requirement, with a further third of people saying they were advised they would not be able to get a loan without it.
The study found that more than half of people were also sold income protection insurance alongside their mortgage, having been informed it was mandatory. However, neither of these insurance policies are a compulsory legal requirement.
Buildings insurance is typically the only cover required as a condition of obtaining a mortgage. This insurance will pay for any damage to the structure of your home, including the walls and roof, and can also be used to entirely rebuild your home if required.
Insurance brokers can earn more money from selling life insurance policies than from the mortgage itself (Photo: Shutterstock)
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The investigation highlighted that insurance brokers can earn more money from selling life insurance policies than from the mortgage itself.
Anthony Emmerson, director of Trinity Financial, told researchers,"If the average house price is £200,000, the broker is going to earn three or four times as much commission on the insurance as they are on the mortgage.
"That might be a driver for them to say it was compulsory, but it would be mis-selling."
Research by comparison website ActiveQuote.com also found that many fail to shop around for a better deal before they buy.
The website's survey of 2,000 UK adults discovered that more than a third (35 per cent) of people said they bought life insurance from their mortgage provider or financial adviser. A further eight per cent said they did not realise they were allowed to shop around for a cheaper deal.
Rod Jones, head of partnerships at ActiveQuote.com, said, "Our research highlights that there is still a lot of misinformation about what is required to get a mortgage, with one in five admitting they don't understand what life and income protection insurance covers.
"While it is advisable to protect yourself when taking on a home loan, it is not a legal requirement."