Insurance Products
When you arrange a new mortgage it is likely to be at a time when you are reviewing your financial position. It is important that you take time to also review your protection arrangements to ensure you, your family and your home are adequately protected. There are some insurances which your lender will insist you take out and some which just make good sense. Here is a brief summary of the types of protection and insurance products available which you should think about:
- Buildings and Contents Insurance - most people will be familiar with this type of insurance which covers the cost of damage or loss to your property, contents or valuables. Your mortgage lender will insist your property is insured for the full reinstatement value of the property (as recommended by the Valuer who carries out the valuation on your house) but it is up to you whether you insure the contents. This is always recommended. Some lenders will offer you their own in house products but it is almost certain you will find a better deal by shopping around or asking us to provide a quote for you.
- Term Assurance - this type of policy protects your family and any dependants in the event of your death before your mortgage is repaid. So should you unfortunately die before the mortgage is fully repaid, your policy will provide a tax free lump sum to take care of this. There are various different forms, two of which are: Level Term Assurance and Decreasing Term Assurance. Level Term Assurance provides the same level of cover throughout the term of the mortgage and can be more suitable if you have an Interest Only mortgage where the level of debt doesn't decrease over time. Decreasing Term Assurance, as the name suggests, provides cover which reduces throughout the term of the mortgage in line with how much debt remains outstanding. This can be more suitable where you have a Repayment style mortgage.
- Family Income Benefit - This is similar in many respects to a term assurance policy but rather than paying out a lump sum, it is intended to replace the income which you would have produced for your family if you were still alive. These policies are relatively cheap in comparison to Level Term Assurance because the cover required decreases over the term of the policy.
- Critical Illness Cover - this is designed to pay you a tax free lump sum on diagnosis of a critical illness such as stroke, cancer or heart attack, whether or not they turn out to be fatal. We recommend you consider carefully this type of policy and how you would repay your mortgage, maintain your standard of living or pay for any other expenses in the event of you suffering a critical illness. Policies vary from provider to provider and we would be happy to offer you our expertise to ensure you have the most appropriate policy for you and your family.
- Income Protection Insurance - This is a long term insurance that pays out when you are unable to work due to illness or accident. It can meet a major need of all earners to protect their income over an agreed period of time. As long as you keep paying the premiums and comply with relevant policy conditions the insurance company cannot cancel the policy or increase the premiums, no matter how many claims are made.
- Accident, Sickness and Unemployment Insurance (ASU) - Unlike an Income Protection Policy, ASU is designed as a short term insurance policy which provides benefits for up to 1-2 years. It can be used to protect a proportion of your gross salary in the event of accident, sickness or unemployment. This type of policy should be considered if you feel that you would struggle to meet your monthly commitments during a sustained period of absence from work.
Please take time to consider these different protection options and contact us to discuss your needs. Policies can vary widely between companies who offer them and it is important you check the details to ensure they meet your needs.
