If you have just bought your first property, then congratulations, you’ve conquered the most inhospitable housing market for the past 15 years. You are also part of an increasingly rare species. The number of first-time buyers in the UK has fallen to a 26-year low.

Extraordinarily high house prices are forcing those who do brave the market into stretching their finances to the limit. The Royal Institution of Chartered Surveyors estimates a typical couple needs to save more than £32,000 for costs before they even move into their home. The average price of a first home is now £150,000, according to Halifax, while in London it is £250,000.

But the rising costs of home ownership mean growing numbers of first-time buyers are ignoring insurance, often because they cannot afford it. Simon Burgess, managing director at insurance broker British Insurance, says a protection gap is developing where young people are spending everything they have just to live and are not taking out insurance protection on their mortgage.

Few first-time buyers make allowances for the possibility of not being able to meet payments. All mortgage holders should consider how they might continue to meet their mortgage repayments if they were to fall ill or lose their job.

When you take out a mortgage you are likely to be given a hard sell by your bank or mortgage broker on any number of tie-in insurance products. James Harrison, chief executive of comparison website insurancewide.com, says it is a good idea to take the details and then search the web to find a better deal.

One of the most common forms of insurance you will be offered is mortgage protection, a form of life assurance. “For a repayment mortgage you can take out decreasing term assurance,” says Harrison. “This means that as you repay [the capital on] your mortgage the level of cover you require reduces and so does the amount you have to pay for protection.”

The other common form of insurance is mortgage payment protection (MPPI) which will pay out if you cannot meet payments for a defined period of time, typically a year. For a mortgage costing £500 a month, insurancewide.co.uk say that rates can range from £38.50 monthly from Cheltenham & Gloucester to £24.50 at Bradford & Bingley. If you take out MPPI cover, check if it covers only accident and sickness or whether it also covers unemployment. You should also check the waiting period – the length of time you have to be out of work before a payment is made.

Jonathan Davis, chartered financial planner at Armstrong Davis, points out that unemployment is at its highest point in seven years and could continue rising.

An income protection plan covering unemployment only can cost as little as £6 per month from Best Insurance. You can take out a plan that also covers accidents and sickness (ASU Income protection) for a monthly premium of £11.25 from Securityfirst.

Davis says that building up a cash reserve for emergencies should be a priority for all new homeowners. If they are unable to afford all forms of cover he recommends income protection, often referred to as permanent health insurance, as the most important. “Young people are often more likely to become injured through sporting activities rather than illness, but if they cannot work the effects are the same,” says Davis. “Income protection does not involve huge costs, and can be reduced further by deferring the point at which payments start.” Deferment is a good idea if you have some money saved to tide you over for a few months, or if you have taken out MPPI which will pay out for a limited period, typically 12 months.

Now that interest rates have risen to their highest levels in more than five years to 5.25 per cent, it is also a good idea to check you have not signed up to any plans you don’t really need.

“Life assurance is an unnecessary cost unless you have dependants,” says Burgess. However the younger you are, the cheaper the cover charge will be. You can either take out life assurance that pays a lump sum on your death or one that pays out an annual income called the family income benefit, which is cheaper. According to moneysupermarket.com, the cheapest deal is at More Than where £100,000 cover costs £9.12 a month. Add on critical illness cover and the cheapest rates are at Torquil Clark, which charges monthly rates of £28.67.

Critical illness cover, which pays out if you suffer a specified illness such as heart attack, cancer or a stroke, is an increasingly popular form of insurance. However some advisers receive large commissions on this product, and it may not be the most effective form of cover for you.

Burgess says before you pay for critical illness cover you should check your employer’s sick pay scheme. “There are some very good ones around and if you have one of these you shouldn’t need to take out critical illness cover,” he says. “However, increasingly employers are using discretionary schemes where they can choose whether or not to pay out.”

As most first-time buyers are relatively young it also makes sense to take out an age-rated policy: the younger you are the less likely you are to become critically ill, incapacitated or unable to find work. As you are less of a risk, some insurers will offer cheaper rates.

Independent advisers and comparison websites such as www.moneysupermarket.com and www.insurancewide.com can help research the market and, if you know what you want, discount brokers such as www.cavendishonline.co.uk can cut the cost of cover.

“Be an informed purchaser,” advises Burgess. “You’ll find the price of apathy will cost you dearly.”