When you take out a mortgage we would always recommend you take out appropriate life insurance too, so that you know your monthly mortgage payments are covered if things go awry.
If you’re buying on your own, a single life insurance plan will probably do the trick, but if you’re going into joint property ownership, a joint plan may be more appropriate. So, which is best for you?
While 60% of those surveyed with a mortgage have a life insurance policy, just 29% have critical illness cover and 19% have income protection insurance, suggesting that better education is needed to help make people more aware of the benefits of taking out protection.
Your ability to maintain your mortgage payments relies on a constant income, so how would you continue to make your mortgage repayments if your income was reduced – or stopped? Here we look at two similar scenarios with very different outcomes.
Many of us pick up a morning coffee on the way to work – it’s a little bit of luxury to start the day for just a couple of pounds. But did you know you could provide something even more satisfying for you and your loved ones for less than the cost of that coffee?
Peace of mind
Protection insurance (or, more specifically, life insurance, critical illness cover and income protection) should be considered essential – especially if you have a mortgage, or people who depend on your income.
A life insurance policy can provide much-needed funds if you’re no longer able to work through illness, injury, or worse. There are even some policies that will also cover you for unemployment. Cover provides peace of mind because you know you and your family will be financially supported if the unexpected happens – and cover might be cheaper than you think.
When it comes to a claim…
If you’ve declined the offer of protection insurance in the past because you don’t believe your insurer would pay out, think again. According to the Association of British Insurers (ABI), 97.3% of all protection insurance claims paid out in 2016, totalling £4.7bn. That’s around £13m a day paid to households hit by the emotional and financial distress and disruption that an unexpected accident, serious illness or death can cause.
Things change – and so should your cover
Even if you already have one or more of these types of plans in place, it’s still important to regularly review your cover levels. Personal circumstances can change and you should make sure your level of cover remains appropriate.
Next time you’re in the queue wondering whether to go for a flat white or hazelnut mocha, why not consider a third option and choose long-term financial security for you and your loved ones. The satisfaction it can provide you is far greater than that from a coffee.
Based on latest data, a 35-year-old non-smoker looking for £250,000 decreasing life assurance and critical illness to cover a 25-year repayment mortgage, could pay a premium of £58.54 per month, equivalent to £1.88 per day based on a 31-day month.
Figures correct as at 7/8/2017
If you’d like more information on what sort of protection insurance would suit your circumstances, please get in touch.
We think protection advice is imperative when you have a home or family you want to protect. So, talk to us about a mortgage and we’ll talk to you about life cover.
Buying a house could be one of the biggest financial commitments you’ll make: getting a deposit together
can wipe out your savings and paying your mortgage will take a chunk out of your income. So how would
your family continue to meet this commitment if you stopped earning?
When taking out a mortgage, it’s essential to consider how you would continue to cover your mortgage
payments if you fell ill or died unexpectedly. There are a number of ways you can do this:
If you died suddenly, a Life Insurance policy would pay out a cash sum to your dependents. They could
use this to pay off their mortgage and keep the roof over their heads.
Mortgage Payment Protection Insurance (MPPI)
Also known as Accident Sickness and Unemployment (ASU) cover, MPPI covers your mortgage related
repayments if you can’t work because of redundancy, accident or ill-health. Benefits are usually paid for 12
months although some providers offer 24 months’ cover.
Critical Illness Insurance
Critical Illness Insurance pays out a lump sum if you’re diagnosed with a specified critical illness such
as cancer, stroke or heart attack. You can use the cash payout to clear your mortgage, pay for medical
treatment, take time to recuperate or anything else you choose.
Income Protection can replace part of your income if you’re unable to work for a long time due to illness
or disability. It will pay out until you return to work or the policy ends – whichever happens first. Income
Protection plans usually have a waiting period before the benefit becomes payable.
Choosing to protect yourself
When you take out a mortgage through us, we’ll ask if you want to take out protection as well. What’s more, we will analyse your lifestyle and any protection shortfall and recommend a protection plan that will help protect you and your family from the financial consequences of serious illness or death.
If you’re one of the increasing number of people who’ve become self-employed in recent years, you may have found the switch has left you without the employee benefits you previously took for granted.
Making the change from employed to self-employed is a big step and it’s one more people are taking.
The number of self-employed people in the UK now stands at 4.80 million, representing 15% of the working population.
But while some may find they can earn more as a result, they might overlook the importance of replacing lost employee benefits like income protection and life insurance.
Death in Service
Many employed people automatically benefit from life insurance arranged on their behalf by their employer. This would pay a multiple of their annual salary were they to die while still employed, which could then be used to pay off a mortgage or maintain their family’s lifestyle.
Some employees receive a proportion of their salary for a period of time if they become unable to work due to illness or injury (over and above statutory sick pay levels) and may benefit from access to private medical treatment.
Clearly, moving from employment to self-employment would mean these benefits cease, and potentially
leave a protection ‘gap’.
Mind the gap
Fortunately, the benefits you may have received automatically as an employee are also available to you as a self-employed individual – and they may be more affordable than you think.
Income protection insurance will pay you a monthly income if you become unable to work through illness
or injury. Self-employed workers should consider this an essential piece of protection because it can help
prevent your family suffering financial hardship and allow you space to recover more quickly without the
burden of financial worry. Many insurance companies also provide support for customers to help them return
to fitness as quickly as possible.
Life and critical illness plans can be individual plans or combined. Life insurance will pay out a lump sum or
a regular income to your dependants if you were to die during the term of the cover. Critical illness plans pay out a lump sum if you are diagnosed with a specific illness. Both can help secure your family’s financial future.
Private medical insurance (PMI) may be considered less of a priority than either income protection or life
insurance, given the treatment you are entitled to via the NHS. For those seeking to replicate all the benefits
they may have enjoyed when employed, there are a range of policies available at varying price levels. If you are interested in PMI we can introduce you to our PMI referral partner.
Are you covered?
If you’re self-employed it’s easy to make sure your employment status doesn’t put your long-term financial
security – and that of your family – at risk. Get in touch to discuss your protection options.
Have you upgraded your mobile phone in the past two years?
If the answer’s yes, your choice may have been driven by a change in your needs or wants. Perhaps you opted for a better
deal, a different contract, or a handset with new features that weren’t available with your previous model?
When it comes to updating your phone TV or even your car we all want to feel like we’re getting a good deal.
The question is: why don’t more of us do this with items like the financial products we pay for every month?
Are your current arrangements still right for you?
Take critical illness insurance as an example. If you have a critical illness policy:
• When did you last update it?
• Does it still provide the cover you need?
• Does it continue to provide the benefits and features you need?
When your needs change, it makes sense to update things
Life may have changed since you last bought or reviewed your critical illness insurance cover. You may have had children, moved house, or your income may have changed.
This means that even though you have a critical illness plan in place, it might not offer you the level of cover you’d need if the unexpected happened. However, it might also provide cover for certain conditions which may not be available on a new plan.
It’s not just mobile phone companies that compete to offer the most innovative products – insurance companies are constantly updating their products to reflect customers’ changing needs too.
Given that more of us are living longer and surviving serious illnesses like cancer it is perhaps unsurprising that products like critical illness insurance have changed in recent years. For instance, many insurers have introduced greater flexibility and extended their cover to cater for a wider range of illnesses. Some have even introduced completely new products offering partial pay-outs, or for an additional cost, allow you to claim for non-critical illnesses and injuries.
Protect your loved ones
Critical illness insurance can help you cover mortgage or rent payments, treatment, or any home alterations you may need to make as a result of an unexpected critical illness – so it’s important your cover remains up-to-date.
We can review your needs and make sure you have the right cover in place. To arrange your review, please get in touch
Millions of pet owners have purchased insurance in case of an expensive trip to the vet’s, but who will pick up the bill if something happens to you?
Many pet owners will know the stress and financial burden caused by an expensive vet’s bill and have taken out pet insurance to avoid having to make difficult decisions at stressful times. In fact, figures show 3.9 million dogs and cats are covered by pet insurance.
However, it seems we place more value on our pet’s wellbeing than our own, with almost 8.5 million people in the UK potentially needing some sort of insurance cover, having none.
Why aren’t we insuring ourselves?
One in four breadwinners does not have life insurance in place, risking leaving their families in financial difficulty if they were unable to work – or worse, died. It seems women are in a worse position than men, with 38% protected by some sort of policy, compared to 45% of men.
So what is it that puts us off buying insurance? Perhaps it’s the thought of paying out each month but not seeing any benefit from the cover.
Far from being a luxury, protection insurance should be considered essential. If you suffered a serious illness or injury you may lose your income, and this could lead to you losing your home. Similarly, if you died, would your loved ones be able to maintain their current lifestyle without your income?
If you think it’s not going to happen to you, you may be surprised to know:
• half of people in the UK born after 1960 will be diagnosed with some form of cancer during their lifetime
• In 2015/16 8.8 million working days were lost due to musculoskeletal disorders
• there are up to 175,000 heart attacks in the UK each year
Insurance policies can provide funds to help deal with the financial consequences of illness, an accident, unemployment or death. Whether that’s to help pay the mortgage, maintain your family’s lifestyle, or even help pay for medical treatment or specialist nursing support.
The next time you’re renewing your pet insurance, check our own level of cover too.
If you’d like more information on the types of cover available and whether they are suitable for you, please get in touch.
Contact us today for a Life and Protection Insurance review
When it comes to protection insurance, we hold two firm beliefs:
1. it should form the foundation of your financial plan.
2. cover should be reviewed regularly to make sure it continues to meet your needs.
The latter is particularly important when you are at a particular ‘life stage’. Whether that’s buying a house, getting married, starting a family, setting up in business, or all of the above, protection insurance will help to protect your loved ones and your financial responsibilities.
So what type of cover is right for you?
• Term Insurance pays out a lump sum if you die within the agreed ‘term’ (the amount of time you have chosen to be covered for, eg. 20 years). Suitable for mortgage protection or while children are financially dependent on you.
• Whole of Life Insurance pays out a lump sum when you die, whenever that is, as long as you are still paying the premiums. Suitable for estate planning or to cover things like funeral expenses.
• Critical Illness Insurance pays out a tax-free lump sum on the diagnosis of certain life-threatening or debilitating conditions, like cancer, heart attack or stroke. You may decide to buy Critical Illness Insurance when taking on a major commitment, like a mortgage or starting a family, but it can be bought at any time to provide peace of mind.
• Income Protection Insurance pays out a regular, tax-free income if you become unable to work because of illness, injury and some policies cover unemployment. It could help you keep up with your mortgage or rent payments, as well as other living costs, until you’re able to return to work.
Things change – and so should your cover
You may already have one or more of these in place, but it’s still worthwhile reviewing your current cover levels – especially if your circumstances have changed. Ask yourself:
Whether your family could cope financially if either you or your spouse/partner died?
How much income would you have if you were taken seriously ill and couldn’t work?
Would your business survive without you or your key people?
How would your lifestyle change if you had an accident and couldn’t do the things you do today?
Contact us today for a Life and Protection Insurance review