Life Insurance is designed to pay out a lump sum to a specified beneficiary in the event of your death. The beneficiary is usually a loved one who is financially dependant on yourself, providing peace of mind that they would not struggle financially if the worst were to happen. The policy would pay out a tax-free lump sum to your dependants upon death. It is important to receive advice in this very important area with the three main types of Life Insurance policies being Decreasing term, Level term and Whole-of-Life insurance.
Decreasing Term – This is a policy usually taken out to pay off your mortgage in the event of death. This sum insured decreases in line with your mortgage and is usually the most cost-effective form of Life Insurance, as it means you are not over insured at any point.
Level Term – This is a policy often taken out in line with an interest only mortgage as the balance does not reduce and neither will the amount of cover. This is also often used to provide a lump sum for a loved one upon death.
Whole-of-Life – This is designed to protect you for a lifetime. The costs associated are usually much higher as you will pay premiums right up to the point of death or until it is cancelled, and the pay-out is guaranteed.
Critical Illness Insurance
Critical illness insurance is designed to provide a tax-free lump sum in order to provide financial protection if you were to suffer a specified serious illness. This can be taken out as a stand-alone policy; however, it is normally taken out alongside Life Insurance meaning that you would be able to repay any mortgage upon death or serious illness. Although the policy pay-out can be used to pay off the mortgage balance upon specified serious illness this is also frequently used to support your loved ones and yourself through a difficult time in life making any necessary changes to your home, replace any earnings through time taken off work or pay for private medical treatments. Like Life Insurance this can be taken out on a level term basis guaranteeing a specified lump sum or it can be taken out on a decreasing basis in line with your mortgage, which could be a more cost-effective method. The conditions covered from each provider can vary as can the costs involved. As with any protection policy We would recommend speaking to one of our expert advisers to find the most appropriate and cost-effective cover for you and your family.
Income Protection is designed to replace your regular income if you are unable to work through illness or injury. This typically pays out between 50-70% of an occupational income. Income protection policies can pay-out until you are able to return to work, retirement, death or the end of an agreed policy term or the agreed policy payment period. A deferred period is something agreed before the policy is put into place. This will normally be for a period of time where you will be comfortable that you could support yourself financially without being in receipt of any income or is normally set in line to tie in with any workplace benefits. Generally speaking, the longer your deferred period the cheaper your monthly premiums will be. Unlike Critical Illness Cover, Income Protection is paid out on a doctor’s note, as opposed to a specified serious illness.
There are two types of insurance to be aware of in relation to Home Insurance, which are Buildings Insurance and Contents Insurance. These are normally taken out in conjunction with each other, but they can be taken out as stand-alone policies.
Buildings insurance – Buildings insurance is a mandatory requirement of all mortgage offers and must be in place at the time that you exchange contracts as it is at this point that you become liable for the property. The amount insured would be based on the expected rebuild value of the property as opposed to the mortgage amount or actual value of the property. If you own a lease hold property it is worth noting that your home insurance will be covered through a maintenance charge.
Contents insurance – Whereas contents insurance is not a mandatory condition of your mortgage it is highly recommended as it would protect the contents of your home in the event of accidents or in a major incident such as floods or a fire. It is also advisable to include any personal valuable items that you take away from the home such as jewellery and mobile phones as this can be a much more cost-effective way of insuring these items than doing so on individual policies.
Our expert advisers will always provide a quote on any purchases as it is an important part of our job to make sure your new home is properly protected. Our panel of providers have all been awarded 5* Defaqto ratings to provide you with the certainty that you have great quality cover.