Life Insurance / Mortgage Protection
What is Life Insurance?
Life insurance isn’t like any other insurance policy you’ll have. Car insurances covers you for something that may never happen, or will happen more than once depending on your driving abilities, as does building and contents insurance. Unlike these policies, the inevitable is going to happen, and having a life insurance policy gives you peace of mind that your loved one’s will be looked after financially.
Before you jump in head first, buy a policy and realise the insurance company think you’re a 104-year-old who smokes like a chimney and works on an oil rig, first think about why you want to be covered. This could be because:
You just bought a new home
Having a life insurance policy means the people you share your home with could pay off the mortgage after you’ve gone with a lump sum pay out.
You’re having children
A life insurance policy will pay out a lump sum which can be used to provide for your children growing up when they can no longer rely on your income.
You want to leave a legacy
A life insurance policy could provide your family or friends an inheritance when you die.
You’d like to cover your funeral costs
A lump sum pay out from a life insurance policy could mean your family don’t have to worry about your funeral costs.
What Type of Life Insurance Do You Need?
Your life insurance policy is dependent on your individual needs. There are two main types of policies to consider:
This gives you cover for a fixed price for a fixed amount of time. If you pass away during this time the policy will pay out a lump sum. This type of insurance is ideal if you want to make sure your loved ones can continue with their current way of life.
Decreasing Cover Insurance
This type of cover is also known as Mortgage Life Insurance, ideal for people whose financial commitments will reduce over time. A perfect example of this is someone repaying a mortgage, that naturally will decrease over their lifetime.
There are other types of insurance that you may want to consider such as:
Critical Illness Cover
This cover will pay out a tax-free lump sum to you if you are diagnosed with a defined critical illness at any point during the policy. This is to cover things like medical expenses or mortgage payments if you are unable to work. Types of illness covered can vary so be sure to check this with the policy provider!
How Much Cover Should You Take Out ?
Of course, the more protected you are the higher your premium is likely to be. There are ways to work out how much cover you need dependent on the type of policy and what you want to be covered for.
It’s a personal choice and will also depend on how much you can afford to pay…you may have to cut back on a few coffees a month…but you and your family will be glad you did!
If you’ve just bought a new home or you’re looking to cover your mortgage after you’ve gone, the right cover can easily be calculated by one of our experienced specialists.
If you are planning to provide for your family long after you’ve gone, it’s probably beneficial to look at your current outgoings and potential future outgoings to work out an accurate figure.
If you’d like to leave an inheritance or cover your funeral costs, the cover you require may depend more on what you can afford to pay in premiums rather than the level of cover you require.
The Jargon Explained
This is a collection of all your assets. So your house, car, savings & investments.
A legally-acknowledged arrangement to pass on your assets under stipulated conditions, such as when you die.
How long the policy lasts for, i.e. 5-40 years.
Fixed premiums (also known as guaranteed premiums)
These premiums are fixed and guaranteed not to change during the policy term, unless you alter the cover.
Using Life Insurance to Cover Inheritance Tax
The main reason people still take out whole-life cover is to help cut their family’s tax bill, particularly inheritance tax (IHT).
When you die, IHT is charged at 40 per cent on all your assets worth more than £325,000. This includes the family home, which means that millions now pay this unpopular tax.
If you take out a whole of life policy and write it under trust, your beneficiaries should receive a cash free lump sum, which they can use to pay the IHT bill.
Putting Life Insurance Into Trust
What is A Trust?
A trust allows you to set aside an asset to benefit a specified person or people (the beneficiaries).
The asset is managed by a trustee or trustees until such time as the beneficiary is intended to benefit.
So, for example, your spouse may look after property on behalf of your children until they reach a responsible age.
Life insurance policies are such an asset, and putting a policy into a trust can affect what happens to the payout from a policy in the event of your death.
Note: In industry jargon, putting a life insurance policy into a trust is known as “writing life insurance in trust” or a policy is “written in trust”.
Do I pay Inheritance Tax if My Policy is Written in Trust?
Under normal circumstances, the payout from a life insurance policy will form part of your legal estate, and may therefore be subject to inheritance tax.
By writing a life-insurance policy in trust, the proceeds from the policy can be paid directly to the beneficiaries rather than to your legal estate, and will therefore not be taken into account when inheritance tax is calculated.
This means the value of your estate may not move above the threshold, depending on your circumstances.
If My Policy is Written In Trust Will it Pay Out Quicker?
Writing a policy in trust also means payment to your beneficiaries will probably be quicker, as the money will not go through probate.
This is a legal process which confirms an executor’s authority to deal with your possessions.
So, for example, if you leave everything to your spouse in your will, then your spouse will have to get probate granted before they can distribute your money, property and so on.
This process can take a long time, even when there is a will. In cases of intestacy (where there is no will), it can drag on for a lot longer.
However, if the life insurance policy is put into trust, then it can pay out before probate is granted, as the insurance provider will just require a death certificate before paying out.
Will a Trust Cost me Extra?
No. Your insurance provider should be able to provide you with this option for free when taking out the policy.
Some existing life policies can also be transferred into trust. Although if you want to write a life insurance policy in trust, we suggest you speak to an independent legal advisor first.
Over 50’s Plans
What is an Over 50's Plan?
An Over 50’s Plan is a type of Life Insurance policy that is designed to cater specifically to people aged 50 years and above.
Unlike standard life insurance policies however, acceptance for an over 50’s plan is not subject to medical history or lifestyle and therefore in most instances acceptance is guaranteed.
How Long Will My Cover Last?
You’ll be covered for life as long as you pay your premiums. What’s more, with most plans, once you reach the age of 90 you stop paying premiums but your cover will carry on until you die or if you claim a terminal illness pay out.
Will My Payout Be Taxed?
The pay out on death won’t attract Income Tax and Capital Gains Tax, but it may be subject to Inheritance Tax unless your policy is written in trust. This reflects our current understanding of the law and the HMRC practice, which can be subject to change.
Will My Cover Stop or Reduce If I Get Ill?
No. Your cover would only be stopped if you stop paying your premiums.
How Much Does It Cost?
Premiums start from as little as £10 and go up to £75. How much you pay is entirely up to you. Speak to one of our friendly advisors to see how much cover you could get for your money.
What is a Funeral Plan?
Funerals can be expensive, costing perhaps several thousand pounds, and many people worry that when they die, they won’t leave enough money for their funeral.
With a funeral plan, you arrange and pay for it in advance.
You can arrange a funeral plan for your own funeral or for someone else’s, as long as the funeral will be held in the UK.
But a pre-paid funeral plan is not the only way to pay for a funeral. There are other options, such as an over 50’s plan, that could be considered to help cover funeral costs.
How Do Funeral Plans Work?
You pay either a lump sum or instalments to the plan provider, or to a funeral director.
Your money is either invested:
- Into a trust fund with trustees, or
- In an insurance policy, which is then used to pay for the funeral whenever that turns out to be
The aim of both methods is to safeguard your money until it’s needed, ensuring that it’s used to provide the funeral you have paid for.
What Does a Funeral Plan Cover ?
Funeral plans usually don’t cover everything that is needed for a funeral.
What’s covered will vary from provider to provider, so you should check the details of any plan carefully before you buy it.
The cost of a burial plot is often not included, and neither are costs that are not usually met by the funeral director, such as the cost of flowers and catering.
Also, some providers will only pay a contribution towards cremation or burial costs, leaving your family to pick up the rest of the bill.
What is Health Insurance?
Most UK residents are entitled to free healthcare from the NHS, however the highest level of care is rarely available through the NHS.
Health insurance pays all – or some – of your medical bills if you’re treated privately.
It gives you a choice in the level of care you get and how and when it is provided.
You don’t have to take out private medical insurance – but if you don’t want to use the NHS, you might find it hard to pay for private treatment without insurance, especially for serious conditions.
What Does Health Insurance Cover?
Like all insurance, the cover you get from private medical insurance depends on the policy you buy.
Basic private medical insurance usually picks up the costs of most in-patient treatments (tests and surgery) and day-care surgery.
Some policies extend to out-patient treatments (such as specialists and consultants) and might pay you a small fixed amount for each night you spend in an NHS hospital.
What Isn't Covered?
Your healthcare insurance usually won’t cover private treatment for:
- Organ transplants
- Injuries relating to dangerous
- Pre-existing medical conditions
- Normal pregnancy and childbirth costs
- Cosmetic surgery to improve your appearance
- Injuries relating to dangerous sports or arising from war or war-like hostilities
- Chronic illnesses such as HIV/AIDs-related illnesses, diabetes, epilepsy, hypertension and related illnesses
You might be able to choose a policy which covers mental health, depression and sports injuries but these aren’t always covered.
What Are the Benefits?
There are a number of benefits to Private Medical Insurance, some of which are listed below. Please note that all will depend on the policy you choose.
You can ask your GP to refer you to an expert or specialist working privately to get a second opinion or specialist treatment.
Get the scans you want
If the NHS delays a scan, or won’t let you have one, you can use your cover to pay for it.
Reduce the waiting time
You can use your insurance to reduce the time you spend waiting for NHS treatment, if your wait time is more than six weeks.
Choose your surgeon and hospital
You can (in theory) choose a surgeon and hospital to suit your time and place – which isn’t possible on the NHS.
Get a private room
You can use it to get a private room, rather than staying in an open ward which might be mixed-sex.
Specialist drugs and treatments might be available
Some specialist drugs and treatments aren’t available on the NHS because they’re too expensive or not approved by the National Institute for Health and Clinical Excellence in England and Wales (NICE) or the Scottish Medicines Consortium (SMC).
You get quicker access to physiotherapy sessions if you have insurance than you would through NHS treatment.
What is Income Protection?
It’s not something that may often cross your mind how you would continue to pay your bills if you or a partner were unable to work, but it’s something that should! Long gone are the days where you can rely on the government to cover your costs with benefits when you’re out of work through sickness, an accident or even redundancy.
Income protection policies protect you if you were unable to work due to redundancy or worse, if you were to fall ill or have an accident. The cover can provide you with tax-free income whilst you’re out of work and can continue until you are fit to return to work or you retire.
The policies are to help you pay your bills, like your mortgage, rent or utility bills, so that you can maintain your standard of living whilst you are out of work.
Do You Need Income Protection?
It’s likely that the first thing you probably thought of when you bought a house, had children or thought about life insurance was a typical life insurance policy (i.e. one that pays out a lump sum to you or your loved ones if anything happened to you). But, in some cases, Income Protection may actually be the better option.
As unfortunate the statistic may be, it is a lot more likely you or your partner will be out of work through long-term sickness, an accident or redundancy than through death. Income Protection often covers your mortgage or rent payments, your utility bills and other monthly expenditures so it may be worthwhile considering an Income Protection policy.
What Are the Different Types of Income Protection?
There are two types of policies to protect your income.
PHI, known as Permanent Health Insurance (not to be confused with private health insurance!), means you can protect a portion of your income in the event of an accident or illness. PHI often protects 50% of your gross salary and can pay out until you reach retirement age.
ASU is Accident, Sickness and Unemployment cover, which protects the payments on your mortgage or rent, debts and sometimes extra income in the event of an accident, illness or if you are made redundant. There are three options with an ASU policy, which will determine the level of cover and how it pays out in the event of illness, accidents or loss of job. These are:
This covers you if you fall ill or are diagnosed with an illness that would prevent you from working.
This covers you if you have an accident that leaves you unable to work.
This covers you if you lose your job or you are made redundant.
Can You Have More Than One Income Protection Policy?
It is possible for you to have more than one income protection policy but it is worth noting that this may not be the most cost effective way of protecting your income. It’s also important to remember that your 50% monthly salary limit still applies regardless of how many policies you own.
How Much Does Income Protection Cost?
Like any other insurance policy may have, your Income Protection premium is determined by lots of different factors including:
- Your age
- Your health
- The amount you’re covered for
- The policy term
- The deferment period
- Your drinking and smoking habits
For example, a 25-year-old with a 35-year cover could, on average, pay between £10 and £24 a month. Again, this is entirely dependent on the factors mentioned above and how long you would have to wait after losing your job before you could claim.
Critical Illness Cover
What is Critical Illness Cover?
Critical illness insurance will pay out if you get one of the specific medical conditions or injuries listed in the policy.
But be aware that not all conditions are covered and policy will also state how serious the condition must be.
Don’t confuse critical illness cover with life insurance, although they are sometimes sold together.
Examples of critical illnesses that might be covered include:
- Heart attack
- Certain types and stages of cancer
- Conditions such as multiple sclerosis
Most policies will also consider permanent disabilities as a result of injury or illness.
It only pays out once and then the policy ends.
Some policies will make a smaller payment for less severe conditions, or if one of your children has one of the specified conditions.
Do you need Critical Illness Cover?
State benefits might not be enough to replace your income if something goes wrong.
If you’re eligible, welfare benefits range from around £70 a week to just over £100 a week, depending on your circumstances (i.e. whether or not you have children, a certain level of savings, or if your partner works).
You should look at getting critical illness cover if:
- You don’t have enough savings to tide you over if you become seriously ill or disabled.
- You don’t have an employee benefits package to cover a longer time off work due to sickness.
What Isn't Covered?
Some serious illnesses might not be covered, for example, some cancers and conditions not listed in the policy.
You probably won’t be covered for health problems you knew you had before you took out the insurance, and this type of insurance doesn’t pay out if you die.
What’s covered and what’s not, will be set out in the policy details so make sure you’re fully aware of them and that they cover your needs.
What Does it Cost?
Your monthly payments will depend on a number of factors, including:
- The amount of cover you take out
- Whether you smoke or have previously smoked
- Health (your current health, your weight, your family medical history)
- Job (some occupations carry a higher risk than others and might mean you have to pay more each month
What is Buildings Insurance?
This is a policy which covers damage to the structure of your home such as the walls, roof and floors.
It usually covers damage to fixtures and fittings too.
So if you’ve got a fitted kitchen or bathroom, your insurance is likely to pay for any repairs you need.
What Does Buildings Insurance Cover?
It covers the cost of repairing or rebuilding your home if it’s damaged.
Policies vary from one insurer to another in exactly what events you’re covered for.
However, generally speaking you’ll be able to claim if your home is damaged by:
- Falling trees
- Fire, smoke, explosions
- Car and lorry collisions
- Water damage from leaking pipes
- Oil leaking from your heating system
- Natural events such as storms and floods
Depending on the type of policy you get, it might also cover other structures around the home such as garages, outside walls and driveways.
What Isn't Covered?
You won’t be covered for general wear and tear and each policy will have its own exclusions (things you won’t be able to claim for).
These often include damage caused by:
- Leaking gutters
- Some pests (for example, insects and birds)
- Frost (unless it causes damage from a burst pipe)
You can’t normally claim for loss or damage which happens whilst your property has been left unoccupied for more than 30 or 60 days.
Many insurers will let you arrange cover if you let them know in advance.
Storm damage to gates and fences is also unlikely to be covered.
Exclusions vary from one policy to the next so make sure you read the policy carefully.
Do You Need Buildings Insurance?
If you own your own home or are renting out a property then you’ll need to have buildings insurance.
Your mortgage will usually include this as a condition, so not having a policy in place could put your mortgage – and your home – at risk.
You don’t need buildings insurance if you’re renting a property, because it is your landlord’s responsibility to sort out a buildings insurance policy.
If you’re a tenant, you might want to consider taking out home contents insurance cover.
What is Contents Insurance?
This type of insurance covers loss or damage to all the things in your home which are not part of the structure or the building.
What Does Contents Insurance Cover?
All your personal belongings – in other words anything not physically attached to the building – will usually be covered for loss or damage.
This generally includes:
- Electrical goods
Different policies offer different levels of cover but generally you’ll be covered against theft, fire and flood.
‘Accidental damage cover’ is usually optional so don’t assume it’s included in your policy.
‘Personal possessions cover’ is also an optional extra.
This will cover items you take outside your home, including:
- Jewellery, and
- Mobile phones
Some insurance policies will also cover you when you go abroad so if you lose or damage your possessions while you’re away, you’ll be able to claim for them on your contents insurance.
This is usually an optional extra which you pay a higher premium for.
What Isn't Covered?
As with all insurance policies there are a number of things which won’t be covered by contents insurance.
Depending on your policy, this could include:
- Wear and tear
- The structure of your home such as the walls and the roof – you’ll need to cover these with a buildings insurance policy
- Damage to a computer caused by a virus
Cover for valuables usually consists of:
- A single item limit
- A total amount for all of your valuables, and
Many contents policies have a single item limit of just £1,500.
If you’ve got expensive items such as jewellery or works of art, you might need to buy extra cover for these when you take out your policy.
It’s important to fully understand the terms and conditions of your policy and any exclusions (things that aren’t covered) so that you know what you can and cannot claim for.
Do You Need Contents Insurance?
Unlike buildings insurance, your mortgage provider won’t insist on you having contents insurance, but it’s a good idea in case the unexpected happens and your home is burgled or there’s a fire.
You’ll have an excess on your contents insurance which means you’ll need to pay a minimum amount every time you claim.
If you make a claim for £300 for example, and your excess is £250, you’ll only get £50 from your insurer.
Why Take Out Travel Insurance?
The average cost for overseas medical treatment is £2,040, but can be much higher.
For example, in one case treating multiple fractures and an artery tear in the USA, a British citizen was forced to take an air ambulance back to the UK.
The cost of the treatment and transport was close to £500,000.
- Getting medical care on holiday could cost you thousands of pounds.
- Travel insurance that covers getting you home and medical expenses is essential.
- Other insurance – like credit card accident cover and private health insurance – doesn’t cover most travel emergencies.
- Without insurance, you might have to cover emergency expenses on your own – the British Consulate is unlikely to help you.
What Does Travel Insurance Cover?
Most policies include cover for:
- Lost or stolen bags*
- Emergency medical expenses
- The costs of cancelling, delaying or cutting your trip short*
- Personal liability, in case you’re sued for damaging property or causing injury
*Baggage and cancellation cover might be additional extras within some policies
What Isn't Covered?
There are some common things you should watch out for:
- If you’re over 65 or have a medical condition, you might need specialist insurance. If you have a medical condition you have to tell your insurer if asked or risk invalidating your insurance policy. When you buy insurance you must answer all questions about your circumstances and health honestly. You have to include everything, even if you think it’s not important, for example taking regular tablets for high blood pressure or angina. If you don’t your policy won’t be valid.
- Adventure sports, winter sports and any ‘dangerous activities’ are often not covered as part of a standard travel insurance policy and you might need extra cover.
- With most policies, you aren’t covered for travel to countries or regions that the Foreign and Commonwealth Office recommends avoiding.
Is Travel Insurance Value for Money?
The main benefit of travel insurance is in having emergency medical cover on holiday.
- What happens if you have a bad fall on the ski slopes and need a helicopter to a good hospital?
- How would you cope if one of the kids fell ill – even with something minor – in the US or another country with sky-high medical costs?
With those costs covered, you’ll quickly realise the value of having a holiday insurance policy.
The cover you get for personal possessions can be covered under your home contents insurance policy. It’s best to check whether you have this already before you add it to your travel policy.
Some travel insurers will give you a discount if you exclude baggage cover.
Is Pet Insurance Worth It?
The average pet insurance claim is £720, but claims can run into the thousands if your pet develops an on-going condition.
If you’re unsure if pet insurance is worth it, consider how you would deal with an unexpected bill.
You’ll need to balance this with the cost of your premiums and the likelihood that you’ll make a claim.
What Can Pet Insurance Cover?
Like other forms of insurance, pet insurance policies can vary widely.
This means it is very important to get the right cover for your pet so do your research and read the fine print of your policy.
Along with veterinary bills, items that can be included are:
- Loss and theft of your pet:make sure this covers your pet’s purchase price, which you might require proof of, otherwise your insurer might pay ‘market value’. The insurance company might also pay towards the cost of advertising your lost pet (£300 or more) and the cost of a reward for its recovery (£250 or more). Although a treasured member of the family can never be replaced, some policies will offer sufficient cover to replace your pet if they are not found.
- Treatment for behavioral problems: should also be covered in a good policy and cover needs to be for £500 or more. The treatment might also need to be carried out by a professional organisation or under the direction of a vet.
- Death by illness or injury: will need to cover the pet’s purchase price. You might be required to arrange for a qualified vet to certify the cause of death. An age limit usually applies to cover for death by illness. A good policy should also cover euthanasia if your pet has to be put down.
- Liability cover:available for dogs only and will cover any costs you’re legally responsible for paying if someone is injured or property gets damaged in an incident involving your dog. Cover is usually for £1 million or more, but only costs the insurer has agreed to will be covered. Most policies also specify that you shouldn’t admit liability. You can get pet insurance either just to cover this situation (third party) or as part of a more comprehensive pet insurance policy. The Dogs Trust will give you third party cover up to £1 million as part of their membership.
Cattery and kennel fees if you have to go into hospital for more than 4 days in a row. Cover needs to be for £500 or more.
Any emergency treatment your pet might need when travelling abroad. Cover needs to be for £1,500 or more.
What Types of Cover Are Available
This is the most comprehensive type of cover you can get.
You pay premiums every year during your pet’s life and the insurer will have to keep covering you regardless of age or any existing conditions (subject to conditions).
However, as you pet gets older your premiums are likely to go up.
You pay for 12 months’ worth of cover on a rolling basis, giving you the option to switch to a cheaper policy each year.
This kind of policy costs less, but might offer less comprehensive cover and generally will not cover pre-existing conditions.
You’ll also struggle to find insurance as your pet gets older.
The most basic and cheapest level of cover available. It covers accidents (such as your dog being hit by a car), but not illnesses.
According to Which? 70% of all pet insurance claims are for illness, not accidents.
What is Gadget Insurance?
Gadget Insurance is a cost effective way of protecting the electronic and communication devices you use day to day.
While some gadgets may be covered under another policy such as contents insurance, the likelihood is that this cover would be limited which is why many people choose to take dedicated cover for their valued gadgets.
What Can Gadget Insurance Cover?
Gadget Insurance can cover almost all gadgets and handheld devices. Here is a list of just some of the gadgets you could cover:
- Mobile phone
- Games Console
- Digital Camera
- MP3/MP4 player
- Digital recorder
- Smart watch
Depending on the type of cover you choose, Gadget insurance can protect you against theft, loss, accidental damage and, in some cases, mechanical breakdown.
Am I Covered While On Holiday?
This will depend on the insurer. Most policies will provide worldwide cover for up to 90 days in any 12 month period so your items are covered wherever in the world you take them. Speak to one of our protection specialists to find out what policy best suits your needs.
Do I Need Any Documentation to Make a Claim?
This can vary between insurers. Some will not require any documentation whereas others will require you to provide evidence of ownership. This can be a copy of your receipt, delivery note or confirmation from your network provider that the mobile phone has been used by you.
In some instances you may also be asked to provide evidence that your gadget has been used after the date you insured it.
Our protection specialists can identify which providers would be best suited to your requirements.
Public Liability Insurance
What is Public Liability Insurance
Public liability insurance protects you if clients or members of the public suffer personal injury or property damage caused by your business. It can pay for the costs of legal expenses or compensation claims and is a necessity for businesses that interact regularly with customers.
What Does Public Liability Insurance Cover?
Public liability insurance is designed to cover your business against compensation claims and legal costs, if a customer, member of the public or other third party is injured or their property damaged while on your premises, or while you’re working in their property.
Is Public Liability Insurance a Legal Requirement?
While public liability insurance is not compulsory under UK law, in a lot of instances it would be required by your client contracts. Some companies are also obliged by their regulator or membership body to undertake some form of business insurance.
Employers’ Liability Insurance
What is Employers' Liability Insurance
Employers’ liability insurance is a legal requirement for any UK business employing one or more people. It is used to protect your business against the cost of compensation claims arising from employee illness or injury, sustained as a result of their work for you.
Failure to take the appropriate cover can result in fines of up to £2,500 for each day you are not insured.
Do I Need Employers' Liability Insurance?
You are required by law to take out employers’ liability insurance if you have employees, contractors, casual workers or temporary staff to protect against any claims from employees who’ve been injured or become seriously ill as a result of working for you.
How Much Cover Do I Need?
The level of cover needed and the associated premiums can depend on many factors. For instance, taking out cover for 5 clerical staff would cost you less as a business than taking out cover for 5 manual labourers as the risk of injury would be deemed as lower.
By speaking to one of our experienced protection specialists you can find out the best options based on your individual requirements.