In principle, you should have insurance cover for anything you can’t afford to lose. Technically, you could self-insure. Realistically, when bills could be significant, having an insurance policy is often the only practical option. If you’re a homeowner, here are some types of insurance you should definitely consider.
If you are in employment, check carefully to see what benefits, if any, your employer will pay if you become unable to work for any reason. Some employers may offer generous support. Others, however, will offer more limited support packages or will simply provide statutory sick pay. In these cases, it could be very useful to have an additional safety net in the form of income-protection insurance.
If you’re self-employed then you’re responsible for your own pay and benefits. You may qualify for state benefits but you may not want to rely on them. You might also prefer to avoid the hassle of claiming them. Income-protection insurance could protect your income against the results of illness or injury without the pain of having to deal with the Universal Credit process.
Critical-illness cover pays out if you are diagnosed with one of a range of critical illnesses agreed upon when you took out the policy. It can make a very useful partner for income-protection insurance.
Income protection insurance is designed to pay out due to illness or injury. This means that it will typically pay out if you are diagnosed with a critical illness. The main reason why it can be useful to have critical-illness cover as well is that critical illnesses can have serious financial implications.
For example, you may not simply be able to rest up at home as you would for a minor illness or injury. Instead, you may need repeat visits to a hospital with the associated costs (e.g. travel and parking). You might also benefit from extra help at home. These costs will all come on top of your regular mortgage and bills.
Payment protection insurance may still be associated with the mis-selling scandal of the 1990s. The key point to understand, however, was that the mis-selling scandal, as its name states, relates to how PPI was sold. PPI itself can be a very useful form of cover for people in employment, particularly if you have limited savings.
The whole point of PPI is that it covers payments on a debt (such a mortgage) if you are unable to undertake paid employment. PPI is, therefore, only relevant to people on a PAYE wage/salary, not the self-employed. If, however, you are a PAYE employee, PPI could give you welcome breathing space to find a new job if anything happens to your current one.
Health insurance will pay or help with paying for the cost of medical treatment. Technically, it does not actually assist you with paying your regular mortgage and bills. In practice, the quicker you can get back on your feet, the quicker you can recover your earnings power.
You can choose to rely on the NHS but having private insurance may open up other options. For example, it could make it possible for you to choose to have your treatment at a time that suits you. It may also pay for options that are not (currently) available on the NHS.
Specialised insurance for your assets
As a homeowner, you’ll probably already have regular buildings and contents cover. It may, however, be worth checking to see if it would be better to have specialist cover for some of your assets. For example, covering a bicycle under your home contents insurance might provide less meaningful protection than having specialist cycle insurance.
If you have dependents, then life insurance could help to make their life a lot easier in the event of your death. If you have dependents living with you, life insurance could make the difference between your dependents being able to stay in their home and them having to move out.
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For mortgage payment protection insurance, we act as introducers only.
There are other providers of Payment Protection Insurance [Short-Term Income Protection] and other products designed to protect you against loss of income. For impartial information about insurance, please visit the website at www.moneymadeclear.org.uk
For Specialised insurance, we act as introducers only
With an eventful year finally coming to a close, now seems an appropriate time for people to review their financial situation. This is particularly important for people who have children as they need to ensure that their children will be protected, no matter what life throws at them. Having this right insurance in place is often key to making this happen.
The basics of life insurance
Life insurance comes in two main forms, whole life and term. Whole-life policies remain in effect indefinitely. This means that, as long as the policyholder keeps making the payments, their heirs are guaranteed to receive a payout eventually. Term policies are only valid for a specific period.
If the main purpose of your life insurance is to protect children in the event of your death, then term assurance may be the more practical option. It will ensure that your children will be provided for until they are adults and hence can provide for themselves.
In addition to making sure that you have a suitable level of insurance cover, you may want to think about how the proceeds will be paid. Putting the money into a trust would give you some level of control over how it was spent. It would also separate the insurance payout from your main estate. This reduces the taxable value of your estate and hence could reduce your inheritance tax bill.
Life insurance is for more than just the “breadwinner”
Both parents need life insurance, even if only one is earning an income. The homemaking parent will be providing childcare and this most definitely has an economic value. It may even be appropriate to extend life insurance cover to the children themselves. The death of a child can lead to expenses for the whole family (e.g. funeral expenses) and the cost of cover is likely to be minimal.
Last but not least, if you are depending on relatives for childcare, e.g. grandparents, then it may be advisable to look at life insurance for them too. This may be more expensive (due to their age), but you may only require a short-term policy e.g. until they go to school.
Renewing life insurance is a good opportunity to review legal documents
Making sure that your children are protected means more than just ensuring their financial wellbeing (although this is certainly a good place to start). You’ll also need to think about who would care for them practically if you were no longer here.
It is highly advisable to document your wishes in your will so that they are both clear and legally-enforceable. If you do not, then your children may end up in the care system until there is a legally-binding agreement on their care. This agreement may not be what you or your family would have wanted.
On a similar note, renewing life insurance is also a good time to look at powers of attorney (both financial and medical). This can, indirectly, help to protect your children since it can make life a lot easier for anyone trying to juggle looking after you with looking after them.
Other forms of insurance
Your death isn’t the only issue which could impact your children. In fact, anything which impacts you/your partner, your home and even your pets can also negatively impact on them. This means that, if at all possible, you should think through potential issues and take out insurance to protect against them.
Types of cover you may wish to consider might include Income Protection Cover, Critical Illness Cover, Payment Protection Insurance, Pet Insurance and Home and Contents Insurance. You might also want to consider insurance for your transport, this includes bicycles as well as motor vehicles.
The FCA does not regulate wills and power of attorney
For wills, power of attorney, pet insurance, motor insurance and payment protection insurance we act as introducers only
Many of us lead very busy lives. This means it’s entirely understandable that people often just leave things “ticking over” unless there’s a reason to change them. Often, that’s not just perfectly fine, it’s very sensible. Sometimes, however, it’s a mistake. With insurance, especially protection insurance. It can be a huge mistake.
You need the right level of cover for your situation
Think of insurance as cover for life’s rainy days. Now think about how you dress for a rainy day. If you have to go out when it’s absolutely pouring, you’re going to want your best (and longest) waterproofs. If, however, you’re just popping out into a light shower, an umbrella on its own might be absolutely fine.
The same principle applies to insurance. Admittedly, you can’t change your insurance policy as quickly and easily as you can change your clothes. You can, however, definitely change it and you should, indeed, must change it as your needs change. The good news is that your needs are unlikely to change as quickly as the weather.
Major life events are indicators to check your protection cover
Many forms of insurance are subject to annual review. Some forms of insurance, however, can run for two or three decades. This is particularly likely with protection cover, especially life insurance. Just because they can, however, it doesn’t mean that they should. In fact, they almost certainly shouldn’t. A person’s life can change significantly over that length of time and hence, so can the amount of cover they need.
Protection cover should be assessed at an individual level
In simple terms, if you have dependents, you need protection cover. Even if you don’t have dependents, you may benefit from some forms of protection cover such as critical illness cover. If you share responsibility for dependents (e.g. parents) then everyone involved in caring for the dependents should have their own protection cover. This applies regardless of whether they are earning an income. What’s more, everyone involved in caring for the dependents needs the right level of cover for their situation.
It is impossible to overstate the importance of making sure that each carer has the right level of cover. The reason for this is that the level of cover each person needs may surprise you. For example, let’s say a couple has pre-school children. One parent goes out to work. One parent stays at home to look after the children.
The parent who goes out to work may not need cover to replace all of their income. The parent who stays at home to look after the children will need cover which will pay for someone else to take over their childcare responsibilities. In fact, the home-maker may need a higher level of cover than the breadwinner due to the cost of childcare, especially during the pre-school years.
It can be useful to have protection cover for children
For the most part, children are impressively robust. It is, however, a sad fact of life that some of them will be involved in accidents and/or become sick. Some will even die. For those who do recover, the road back to health can be long, arduous and expensive. When children have their own protection cover, the extra funds can go a long way to ease the burden on parents (and other siblings).
You need to think about how you want to receive any payouts
Some forms of cover may offer protection either as a lump sum or as an income, possibly for a set period (or a combination of both). If so, you need to decide what is right for you, or, in the case of life insurance, your heirs. You also need to think about whether or not you want to put any life insurance payout into a trust, especially if children are involved.
For mortgage & protection advice, please contact us.
It may seem rather ironic to be thinking about home insurance just when everyone can finally get out of their home. On the other hand, most people are going to need, or at least want, to start brushing up their finances. Getting the right home insurance can be a major part of that. Here are some tips to help.
Give yourself time to do your research
Ideally, you want to start looking for a new deal 6-8 weeks before your current one expires (or you get the keys to your new home). That’s late enough that prices are going to be fairly current. It’s also early enough that you should be able to review all reasonable options before making your choice. Whatever you do, avoid just taking out insurance with your mortgage provider.
Give yourself time to brush up your credit record
There are two reasons why insurers are likely to check your credit record. The first is just as a means of verifying your identity. This is just one (more) reason to make sure that your credit record is accurate.
In particular, you need to make sure that all the contact details on your financial products point to your current home address. Also, make sure that you’re on the electoral roll.
The second is to decide if they’re going to offer you the option to pay in instalments and, if so, at what price.
Consider using an insurance broker
In simple terms, the more money you’re spending, the more you could save by using a broker to find you the best deal. This is in addition to the time you’ll save yourself. This means that there’s a lot to be said for using a broker for any major purchase, such as a mortgage.
Realistically, home insurance can be more of a grey area. Some people might be paying enough to justify the fees/commission. Other people might not think it was worth it. If you have a standard property, especially a starter one, and just want a basic policy, then you could probably bag at least a decent deal just by doing your own research.
Remember you’re covering the rebuilding cost
After just taking out home insurance with your mortgage provider, this must be one of the most common and costliest mistakes in home insurance. You are not covering the sales value of your home. You are covering the rebuilding cost of your home. There is generally a significant difference between the two because you will not have to repurchase the land you already own.
Review your excess
Increasing your excess can help to lower your premium. Of course, you need to be confident that you could absorb the excess if necessary. In other words, consider this as an option, just make sure that you use it cautiously, if at all.
See if you can pay upfront
If you pay your fees in instalments, then your insurer is, effectively, giving you credit. They will probably charge for this. How much they charge will generally depend partly on their approach and partly on your credit record. There are, however, usually some savings to be made if you can pay the full year upfront.
Make sure you know what you’re covering
Read the policy carefully and make sure you are 100% clear about what it covers and, by extension, what it doesn’t. In particular, make sure that any areas outside the main property have suitable cover. This could mean anything from a communal stairway in a flat to outbuildings in a house with a garden.
Keep in mind that home insurance can mean exactly that. In other words, it may not cover gardens and outbuildings unless you specifically request it and pay extra.
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Even a global pandemic couldn’t keep the UK’s housing market closed for long and now it’s very much back in business. In fact, it’s moving into peak house-buying season. This means that both buyers and sellers need to think about what they need to do to make their moves happen. For most buyers, that means getting a mortgage. In fact, it means getting the right mortgage.
Getting the right mortgage can make such a huge difference to the overall state of your finances, that it’s worth taking expert advice to get the very best match for your situation. It may save time if you consider the following points before your appointment.
Do you want a fixed rate?
Currently, this is likely to be a major issue for many (potential) borrowers so it’s worth thinking about carefully. The key point to understand is that the major benefit of a fixed rate is stability. You will know exactly how much you are going to pay each month over the payment term.
There is, however, a cost to this stability. Lenders know that they are the ones shouldering the risk of interest-rate rises and they factor this risk into the cost of their products. In other words, a fixed-rate mortgage may end up costing you more than a competitive floating-rate product.
What’s more, fixed-rates are offered for set periods (again to mitigate risk). This means that you need to think about what you will do once the fixed period ends. If you simply drop onto your lender’s standard variable rate, you may well end up finding yourself getting a very poor deal for your money. You could ask your lender to switch you to a new product. If, however, they won’t, or you don’t like their other offers, then you’re looking at paying the more expensive rate or remortgaging with all that implies.
A note on negative interest rates
There has been some speculation in the media that the Bank of England could end up implementing negative interest rates. This may leave borrowers wondering what it could mean for them. The first point to note is that, at present, the issue of negative interest rates is pure speculation. The second point to note is that, even if it does, there is absolutely no guarantee that it’s going to result in a bonanza for borrowers.
Those on a fixed rate are not going to see any change. That’s exactly what a fixed rate means. It doesn’t change no matter what happens. Those on variable rates could, in theory, see themselves being paid to borrow. In practice, however, they may find that there is a clause in their contract which says that their rate will never drop below a certain amount no matter what happens.
Obviously, borrowers are free to remortgage (assuming they meet the relevant eligibility criteria) but it’s hard to see UK lenders falling over themselves to issue mortgages which effectively cost them money. That’s before you get into the issue of assessing affordability and thinking about how borrowers would cope when life returned to normal.
Is a traditional repayment mortgage right for you?
For many people, a traditional repayment mortgage is exactly the right way to go. You pay off the capital and interest over the life of the mortgage and at the end of the term, you own your house outright.
There is, however, a difference between many people and everyone. For some people, interest-only mortgages are the most sensible option, even in the residential market. For others, offset mortgages could offer welcome flexibility in uncertain times.
Even buyers who do want a traditional repayment mortgage may prefer one with more modern options, such as the ability to take payment holidays or to drawdown equity (both within agreed limits).
Your property may be repossessed if you do not keep up repayments on your mortgage.
Equity release refers to home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration
We live and learn and as we learn we grow and change. Some aspects of our life will remain the same all through the passing years, others will change completely and still more will need to be adapted to suit our current circumstances. With this in mind, here are some pointers to look at, when considering what sort of protection you need for your current situation.
What would happen if I lost my job?
If you are currently without debts (including a mortgage) and children, then your first answer might well be savings and/or benefits, but while having emergency savings is always good, by definition, once savings are used they are gone and you may well find you’d prefer to avoid having to deal with the benefits system. Having the right insurance can help to protect and prolong your savings. Some income-protection policies will pay out upon unemployment and hence could be well worth a look. Once debts and/or children come along, then this situation needs to be looked at very seriously.
What would happen if I became unable to work through illness or accident?
Again, if you’re without debts or children, your immediate thought might be to move back with your parents and this can be a feasible solution in some cases. What, however, would happen if your parents’ home needed adjustments made to it to accommodate you until you recovered, for example being made more wheelchair accessible? What if you actually needed care at home? How would your parents and family cope with that? Once debts and children arrive, you really need to have a plan in place for dealing with this situation. You may wish to add critical illness cover for really serious illnesses. Even if you are in employment, it can be worthwhile to arrange your own cover, since you may discover that your benefits are insufficient for your particular situation. The self-employed should make it a priority to check that their insurance cover is sufficient for their needs.
What would happen if I were to die?
If you are without dependents such as children, then life insurance may be irrelevant to you, however if you think that your parents might be in a position when they need help from you in later life, then you may still wish to look at life insurance so as to mitigate the financial impact of your death. As soon as you do have dependents, particularly children, appropriate life insurance becomes of the highest importance, even if you are the home-maker. In the event of your death, someone else will have to undertake all the practical tasks which are currently your responsibility. Life insurance comes in two forms, term insurance (which is for a specific period of time) and whole-life insurance (which stays in place for as long as you pay the premiums). Term insurance is often the best option when people want insurance for a specific purpose, such as to pay off a mortgage and/or to see children into adulthood, but there may be situations when whole-life insurance is a better choice.
Having the right level of cover is as important as having the right sort of cover
If you have too much insurance, your premiums will be higher than necessary, but if you have too little, you will have insufficient protection. Striking the right balance can be tricky, which is why it can be very helpful to get professional financial advice.
For Accident, Sickness and Unemployment insurance we act as introducers only.