A - Z of Protection
Posted on 4th September 2023 at 18:04
Click the letter for the full glossary article
A is for…..After Death
Losing a loved one is something most of us do not want to think about. As a financial consultant, unfortunately I and my colleagues have taken calls from clients notifying us of a death and what do they need to do to claim on the life insurance policy we put in place for them.
So, what happens if you currently have a mortgage and you die?
If you have no insurance policies in place, the surviving partner or family will have to sort out your finances. This may mean if your mortgage is in joint names, the surviving party will have to apply for a new mortgage. However, what if they are not eligible to borrow the amount needed based on their salary alone? What if they would need to give up work to care for children or dependant adults meaning they have no income to use towards the mortgage. They may be entitled to state benefits however these are means tested, there is no guarantee they will qualify. They would therefore need to sell the property. However, this takes time. Whilst mortgage lenders will be sympathetic and give you a grace period, most lenders will want their money back in a matter of months. What if the house does not sell? The mortgage will still need to be paid until completion. As you know when signing up for a mortgage, if monthly payments are not met this affects your credit score. The surviving party may have no choice but to move into rented accommodation once the house sale has gone through however in some cases rent can be more per month than a mortgage.
This is a grim picture to paint. However, this is also the reality some families are left with when a member of the household dies and finances have not been put in order.
How can you protect your family from the above scenario? A life insurance policy.
There are different life insurance policies available and as a financial consultant we will explore the different options through a full fact find. If we use the above scenario, a life insurance policy for mortgage purposes would be the best option to pay the mortgage off in the event of your death. We would always advise to place into Trust. This is completely free to do and means the right money goes to the right people at the right time. When the application for life insurance is submitted we will require Trustees to be nominated. In the event of your death, these Trustees will ensure the funds go to the right place, the mortgage lender. Putting a policy in Trust also means these funds are not held up in the probate process as they are not included in your estate. Probate can be a lengthy process. It also means if inheritance tax is due on the estate, the policy is not taxable at the current 40% rate.
Life insurance doesn’t just need to be for people with a family. You may be a single person with a mortgage but wants to leave the property to a loved one in the event of your death mortgage free. Again, a life insurance policy for mortgage purposes would be an appropriate option for you to leave the property unencumbered.
At HD Consultants we have access to multiple insurers on the market. As a full fact find is conducted, we can find the right insurer for your circumstances. If you have existing health conditions we can speak with the insurer representatives to discuss your individual case and recommend the right policy for you.
B is for…..Broker – why use one?
Every client is unique and their circumstances are unique. When using a fluffy animal website, only basic information can be inputted. How do you know you are getting the best policy for your circumstances? How do you know if the price will be the same after underwriting? How do you know if the insurer you are using is the best one for you? This is why using a broker is the best option when looking for insurance.
We know our stuff! HD Consultants meets with business development managers every Tuesday as part of our continued professional development. The BDM’s will present to us their current policy features, any new products that are coming to market and also offer us assistance with any existing cases.
When you meet with us for the first time we will conduct a full fact find review. We find out your circumstances, medical information, budget, future plans and will use that information to research the market for the right insurer for you. In the event of a claim, we want you to contact us. We can speak to the insurer on your or your loved ones behalf and help guide throughout the process.
Have you heard of a decision in principle for insurance? When you applied for your mortgage you would have had one to confirm you are good for the funds. However, when it comes to insurance, if you have any existing medical conditions, you may not know if you will be accepted until the underwriting stage. You may also receive a quotation but when it goes to the underwriting stage the policy may come back as rated. This means they add a percentage to the premium which could take the policy over your original budget. They may also decline you for certain product benefits. This can all take time. However, we have a fantastic software that enables us to get a decision in principle for your insurance. We disclose to multiple insurers your case and they will assess to tell us if it would be an accept, decline or if the policy would be potentially rated. We can therefore find you the best insurer and give you a more accurate quotation at application.
We will review all different types of insurance relevant to your needs and package together policies to meet your budget. Due to the fact find we will have an understanding of your life style family circumstances to ensure we are highlighting the right insurer for you. For example if you have children, children’s critical illness cover may be an added benefit you wish to have as part of your policy.
As a client of HD Consultants we offer annual financial reviews. A lot can happen in a year so we want to make sure these policies are still fit for purpose.
Finally, we want to ensure you protect yourself for life’s “what if” scenarios. We are so passionate about what we do and want you to be empowered in the decisions you are making. Insurance can be a complicated field to navigate. We will ensure you understand exactly what the policy you have has to offer.
C is for…….claim statistics
A question I get asked regularly from my clients is “do insurance policies really pay out”? My answer to this is, providing all information has been disclosed accurately to the insurer at point of application, there is no reason why a policy would not pay out in the event of a claim.
To back this statement, insurers have accessible information on their websites for you to view their claim statistics. I wanted to highlight some of the insurers claim stats as there are some phenomenal numbers to show how many clients they have helped protect.
Scottish Widows
Claims statistics | For Advisers | Scottish Widows
£207.9 million paid out from life and critical illness claims in 2021 over 10,426 customers
This equates to £821,722 paid out per day
Legal and General
Our protection claims 2021 | Adviser Protection | Legal & General (legalandgeneral.com)
£3.5 billion paid out over the last 5 years (2016 – 2021)
£797 million paid out in 2021
Aviva
https://connect.avivab2b.co.uk/adviser/articles/news/protection/2021-individual-protection-claims-results/#:~:text=In%20the%20last%20five%20years,97.7%25%20of%20all%20claims%20paid.
£1.1 billion paid out in 2021 over life, critical illness and income protection insurance
£5 billion paid out in the last 5 years (2016 – 2021)
Royal London
https://adviser.royallondon.com/globalassets/docs/protection/sap8p10016.customer-claims-sales-aid.pdf
£632 million paid out in 2021 over 84,547 customers
99.5% of claims were paid in 2021
As stated above, families in the hundreds of thousands have received some form of claim pay out. If they didn’t have these protection policies in place, their world could look very different now.
Death in service is a standard benefit offered to employees by a lot companies. It is usually in the form of two to four times your annual salary. This is also tax free. This may sound similar to life insurance. However, there are a number of differences between the two.
Death in service may seem like a substantial sum of money. There are normally terms in order for your company to pay out. Some will only pay out if you physically die at work. Some are at the employers discretion meaning there is no guarantee a pay out will be received by the employees beneficiaries. Death in service benefit ends with your employment. If you move to a new job, there is no guarantee you will receive the same cover. If you are self employed, you do not have death in service.
Whilst death in service is a great employee benefit, there are many factors as to why your employer may not pay out.
The amount a life insurance policy pays out is decided by you and not your employer. There are different life insurance policies available and the relevant policies are recommended after a thorough fact find is completed to understand your circumstances, life style, budget and estate planning requirements. It is not a one size fits all process and is bespoke to you.
Life insurance is also free of income tax or capital gains tax. We always recommend placing into Trust to ensure the right money goes to the right people at the right time. By placing in Trust it will not be subject to the 40% inheritance liability and is normally paid out 30 to 60 days after a claim meaning it is not caught up in the probate process which can take months.
Finally, life insurance stays with you throughout the specified term. If your company no longer exists, if you change jobs, if you get made redundant, your death in service policy is now null and void.
This is why a life insurance policy is always recommend over the death in service benefit offered by your employer.
In the UK, statutory sick pay is paid by an employee to all employees who are off work because of sickness for longer than 3 consecutive work days but less than 28 weeks. To qualify the employee would normally have to have paid National Insurance contributions. The current amount received is £99.35 per week.
Many companies offer an employee benefit of sick pay. This would mean you would receive your normal pay for a set number of weeks if you are off work due to sickness. After this you are likely to receive half your normal pay for a set amount of weeks. Once outside of this set period, you would then be on statutory sick pay. How many weeks of full and half pay is dependant on the employer and at their discretion. The standard term is normally 3 months at full pay, 3 months at half pay then nothing after this period ends. It is not normally available to employees on probation or zero contract hours. Every employer is different and there is no guarantee if you move jobs you will receive the same sick pay as your previous employer.
So what happens if you have to be off work long term? Could you pay your mortgage, rent, household bills on £99.35 per week? Could you maintain your current lifestyle for example cinema trips, days out with the children, after school clubs on £99.35 per week? Whilst this will have an impact on your finances, what impact could this have on your mental health?
You may have savings in place that you could use to pay bills or maintain your lifestyle. How long would these savings last you if you were off work for a year? 2 years? Longer? How long did it take you to build up your savings? It can take years.
You may have a parent or sibling that can lend you some money while your off work. Could they afford to support you long term though?
Finally, you may be entitled to claim benefits. However, benefits are means tested. There is no guarantee you are entitled to them and what amount would be paid.
Whilst employers sick pay is a positive benefit, it is certainly not a long term solution should you be unable to work due to an accident or long term sickness.
I speak with my clients regularly about the what if scenarios life throws at us. An income protection policy is a fantastic way to protect your income and your savings. It is available to both employed and self employed people. You can have short term and long term cover which lasts until you retire or able to return to work. It will pay a % of your income if you are employed or a % of your profits if you are self employed. Income protection can be index linked meaning the money benefit will increase with inflation should you need to claim long term. Like most insurance policies, income protection will come with value added benefits. This may be in the form of mental health and wellbeing support, support in getting you back into work should you be off with a long term illness, debt management advice to name a few. These are at no extra cost (dependant on the insurer).
How do you apply for income protection? After completing a thorough fact find, I will go out to my panel of insurers to find the right insurer for your circumstances and budget. Let me help you protect your income and lifestyle.
There is a famous saying that there are 2 things guaranteed in life, death and taxes. Dying unfortunately is expensive! The average cost of dying is £9,200** The average cost of a funeral reported in 2022 was £3,953**
Your beneficiaries will have the responsibility of making funeral plans. However, what happens if they do not have the funds to pay for the funeral? In many cases families have to borrow money to pay for funeral expenses. This can be problematic should they not be able to get credit. This is why funeral insurance is a simple way to plan for your funeral and subsequent expenses in advance.
Funeral insurance plans are normally paid out quicker than a standard life insurance policy. They are also not included in your overall estate. The probate process can take months to complete, even longer if the estate is contested. Having this policy in place will ensure your beneficiaries receive the money promptly therefore shielding them from any potential debt they would have to take on to pay for the funeral.
Most of us aren’t keen to talk about death. My job as a financial consultant is to help you put plans in place not just for the here and now, but for the future whether that be through life insurance plans to protect your mortgage debt and family, income protection to ensure you can maintain your current lifestyle even if you have to take long term time off work due to sickness and funeral insurance to ensure your loved ones do not need to have the added stress of finding funds to pay for your funeral.
** https://www.sunlife.co.uk/funeral-costs/
In the UK we have a couple of options when it comes to our healthcare. We have treatment options through the NHS. Alternatively you may have a form of private medical insurance. Both options are fantastic however may be met with waiting lists or may not have the right treatment available in the UK to help treat you. In that instance you may need to seek alternative treatment abroad which can cost in the hundreds of thousands if not millions. There are many times I have seen a social media post of family and friends promoting a Go Fund Me page to try and generate funds to send someone to a treatment facility abroad. A stressful situation and no guarantee enough funds can be raised to cover the expense. This is where global treatment cover is a fantastic option.
Global treatment cover is an additional benefit that can be added to Aviva’s life insurance, critical illness and income protection policies. Should you be diagnosed with a serious illness and treatment options abroad are the best options for you, this policy will offer you up to £1 million of cover per year up to a maximum of £2 million during the policy term. This gives you access to international facilities, doctors and treatment all over the world. Global treatment will also include children, providing this is specified at the time of application. As with all insurance, subsequent underwriting to confirm eligibility will be completed at application.
If you would like to enquire further about protecting your debt and family or if you already have an insurance policy in place, let’s review it together to ensure it is the right insurance policy for you. We offer annual financial reviews with our clients to check the insurance you have in place is still right for you and your circumstances. You may not have been aware at the time of application there are added benefits to insurance policies such as global treatment cover.
Finally, at HD Consultants we do not charge for our insurance advice.
Dependant on your height and weight, this can massively effect the insurers you can have life, critical illness or income protection insurance with. Some insurers will decline if your BMI (body mass index) is over a certain number. Some will accept but may increase the monthly premium. Some may accept but have certain exclusions with the policy meaning you would not be eligible in the event of a claim. What ever the reason, shopping around for the right insurer is so important.
Working closely with multiple insurance companies means I have access to their insurance criteria. I can get you an insurance decision in principle meaning the insurer will assess your current medical information, height and weight and let me know if they would accept, decline, exclude certain conditions or rate the policy. Rated policies mean they may add an additional % to the premium so you pay more each month than the initial quotation.
The benefit to this means you don’t have to take time to research insurers, make multiple applications that may be declined, or receive an unexpected increase on the original quotation….I will do this all for you. You have peace of mind knowing you have the right insurance policy at the right price!
At HD Consultants we also hold annual reviews to assess your current insurance policies and ensure they are still fit for purpose. It may have been at the time of application your BMI was higher than it currently is. You may therefore be paying more than you need to each month. The policy may have exclusions due to BMI that can now be re-assessed. By reviewing the policy not only can I see if I can save you money on your monthly premium, you may want to increase your cover, keeping the cost the same each month.
One question I ask every client during our initial meeting is “what would you do if you lost the ability to earn an income”.
There is normally an array of responses from “it’s ok I have sick pay”, to “my parents could help me out for a bit” to “I have some savings”. This may all help for a couple of months. But what happens if you are unable to work long term? How could you keep on top of your bills? How could you maintain your current lifestyle? Would your children be able to attend their afterschool activities? Taking this all away, what impact could this have on your and your families mental health?
“It’s ok I have sick pay”. Sick pay is a fantastic benefit offered by employers. However there is normally a set amount of time you are able to have off at full pay before your income would be reduced and you end up on statutory sick pay, currently £99.35 per week and paid up to 28 weeks. Could you afford to pay bills and maintain your current lifestyle on £397.40 per month? You may be able to claim government benefits. However these are means tested – there is no guarantee you would qualify and for the amount you need. What happens if you leave your job and go to a new employer that doesn’t offer the same sick pay amount? These are all things to factor in to your “what if” scenarios.
“My parents could help me out for a bit”. Whilst family and friends will always try to step in where they can, for them to have to pay an additional lump sum of money each month to cover your bills may not be affordable for them long term. They would need to be paying your mortgage/rent, council tax, gas, electric, water, insurance, broadband, mobile phone, any loan or credit agreements you have in place, food shopping, subscription services you are not able to cancel. All can add up to a large monthly outgoing on top of their own monthly outgoings. If you are unable to work long term, how could this effect them financially? What if their circumstances change and they are not longer able to help you out?
“I have some savings in place”. Savings are a fantastic way to give you a buffer if you had some unexpected bills to pay. If you are in the fortunate position to save money every month, it is great to see that balance grow. However, how would you feel having to use those savings to pay your day to day living costs? How long did it take you to build up those savings? How long would it take for those savings to disappear? What happens when your savings are gone?
“My partner works so we would still have an income coming into the house”. Whilst this is a good solution, does your partners salary cover all household bills and would enable you to maintain your current lifestyle? You may be the main carer for your children. If you were unable to collect them from school or take them to appointments your partner may need to take time off work. This could affect their income. They may need to take time off work to take you to medical appointments. Again, affecting their income.
The scenarios above paint quite a bleak picture if you were ever in a position of not being able to work due to an accident or sickness. Unfortunately, this is a reality for many households. This is the reason I ask the question “what would you do if you were unable to earn an income?” I have a solution.
Income protection is a long or short term insurance policy that gives you a regular income should you be unable to work due to accident or sickness. This can be set to cover you until you retire or are able to return to work. You set the budget and I can build a package to keep you protected. This is available to all employed or self employed people. I will review this with you on an annual basis so any changes to income (for example a pay rise) can be factored in to ensure the policy is fit for purpose.
Losing your income could have a devastating impact on your family. Protecting yourself against life’s “what if’s” can give you peace of mind if the worst happens, you have it covered.
Employers have some fantastic benefits to entice you to work for them. Death in service, private medical insurance, sick pay, wellbeing packages are all great added extras and normally do not come at a cost. However, these are all discretionary benefits. Not every employer has to offer them.
How long do you normally stay with an employer? 30 years ago it was common to stay with the same employer for most of your working life. However now it is quite unusual for employees to stay with the same employer for life. Due to this, each employee benefit package is different. Some may offer 6 times death in service. Some may offer 1 times. Some may offer 6 months full sick pay. Others may only offer 3 months. Some benefits are only available if you are on a full time contract outside of any probation or disciplinary periods. Some employers may need to change their benefits package as a way to cut costs. There are many factors why these added extras must be seen as a benefit rather than a fail safe way to protect you and your family from life’s what if scenarios.
Death in service normally pays out a tax free lump sum to your nominated beneficiary. The amount payable is decided by the employer. Depending on the benefit some employers will only pay out if you physically die at work, whilst working. Some will pay out if you die whilst employed by them. There is also an element of discretion so there may not be a guaranteed pay out. This is why it cannot be classed as a substitute for life insurance. Life insurance is guaranteed to pay out if you die. Many policies will pay out if you are diagnosed with a terminal illness, something death in service will not pay out for. Life insurance will pay out a specified amount (for example the amount you have outstanding on your mortgage) and is normally paid out in 30 – 60 days from claiming. By placing the policy in Trust, which is free to do, you can ensure the right money goes to the right people at the right time and will not be caught up in the probate process which can take months to complete, especially if the estate is contested. It is also not subject to inheritance tax of 40%.
Sick Pay will cover you for a specified amount of time if you are off sick from your employer. Depending on the company will depend on the amount of time. After your sick pay ends you would then move to statutory sick pay which currently sits at £99.35 per week for 28 weeks. If you are on probation, zero hour contract or not a full time employee, you may not qualify for your employers sick pay. Therefore, it cannot be classed as a substitute for income. Income Protection is an insurance to provide you with a regular monthly income should you be off work due to accident or sickness. This can cover you for a specified amount of time or up until retirement. It can be index linked meaning it will increase with inflation.
With all insurances, the younger you are when you take out the policy, normally the better the price. If you move jobs to a company that doesn’t offer any form of benefit package, the policy may be more expensive each month as opposed if you had acted today. You may have suffered a health issue which could increase the premium. According to Legal and General, the average age of income protection claims was 40 years old.**
** https://www.legalandgeneral.com/landg-assets/adviser/files/protection/sales-aid/4_ways_to_protect.pdf
If you are a parent, the last thing you ever want to think about is what would happen if your child became critically ill. You would want to be with your child every step of the way, attending hospital appointments and recovery time. This may mean having to take time off work which in turn, would affect the household income.
Children’s critical illness for some insurers is included with an adult critical illness policy at no extra cost. Dependant on the insurer will depend on the age the child is covered from and the amount you are insured for.
Some insurers will insure you from 24 weeks of pregnancy. This means if your child was to be diagnosed with certain conditions such as down’s syndrome or cerebral palsy whilst in the womb, you could receive a pay out from the insurer. This money could be used to make modifications around the home, replace your income should you need to take time off work for medical appointments, child care costs if there are other children in the household who would be unable to attend medical appointments due to school or pay towards private medical care. Every insurer has a set amount of conditions they will cover the child for as well as the amount that can be claimed.
A question I get asked is how often children’s critical illness is used. The answer is sadly more often than you imagine. In 2021 Aviva reported there were £4.7 million worth of pay outs for children’s critical illness. 33.2% were for cancer.
If you have an existing policy in place, you may be able to add this cover. Some insurers may not even charge for this addition. What ever the case may be, let me review the policy. I can speak to your insurer for you and also review to ensure the policy is still fit for purpose for you and your family.
When looking at options to protect your family in the event of your death, there are many different types of insurance policies. Some pay out a lump sum and some pay out a monthly income.
Life insurance for mortgage purposes pays out a lump sum in the event of your death. Funds will run along side the mortgage for the duration of the policy and once claimed, will pay out a specified amount to either pay off the mortgage in full or pay a percentage of the mortgage off, depending on how much the sum assured is for. This means if there is no mortgage to pay, as life insurance has paid out, the property will be unencumbered and you can either leave it to a beneficiary in your Will or your family can stay in the family home without the stress of applying for a new mortgage or having to sell the house. But what would your family do to continue to pay the bills and running costs of the property if one income has been lost?
Family Income Benefit is an insurance policy that can be put in place to provide your family with an income in the event of your death. If you were to pass away, your household therefore loses an income. The policy will normally run until your children are no longer financially dependant. The benefit of having a monthly income as opposed to a lump sum payment is it is treated just like an income. With a lump sum there could be potential to over spend meaning the money may not last as long as your children are dependant. With a monthly income coming in, this takes away the possibility of over spending on the policy as the beneficiary will receive a set monthly amount. The monthly amount can also be inflation linked.
Family Income Benefit can be used for day to day bills such as your utilities, food shopping, petrol and travel costs. You may need to use the money to pay for additional child care costs such as after school clubs. If you do not have a mortgage, family income benefit can be used to pay your rent and bills. It can also be used to pay educational costs.
Family Income Benefit can be taken as a lump sum payment. Each policy can be tailored to your requirements and family needs. During the fact find stage I will ascertain from you your budget for insurance. I can then create a protection package bespoke to you.
Zurich has reported 17.9 million working days were lost due to work related stress, depression and anxiety in 2019/2020**
Just like our physical health, our mental health needs to be protected. Depression, stress and anxiety can also create physical ill health. This could impact you and your family financially if you need to take time off work. Whilst the NHS is a fantastic service we have in the UK, it usually comes with long wait times for mental health assessments and support. If you are facing a difficult, challenging point in your life, the wait times may feel never ending.
Many insurance policies come with value added benefits, some at no extra costs. Their relationship with you does not start and end with a claim. As a client, you may be entitled to their independent team of counsellors, advisers and legal experts. They are available 24 hours a day, 7 days a week and can be utilised as soon as your policy goes live. Taking advantage of these services, do not class as a claim so will not effect your monthly premium or live policy.
What can these services include?
Referrals to specialist organisations and services, support with education, teenage issues and childcare sourcing, debt and money management help, legal information such as consumer rights, problems at work and relationship and family matters. All fantastic benefits included with your insurance policy.
Are you aware of the value added benefits you have with your existing policy? Let me review the policy today to check it is fit for purpose, that you are paying the right premium and advise of the value added benefits you can start taking advantage of. Book in for a full financial review.
**https://www.zurich.co.uk/news-and-insight/mental-health-crisis-and-how-we-can-help-your-customers
If you are currently in rented accommodation, insuring yourself should you lose your income is so important. If you are unable to earn an income due to an accident or sickness, how can you pay your rent each month? Whilst there are notice periods for eviction, this could put a black mark on your credit rating making it difficult for you to get a reference to rent another property. This would be on top of the stress of dealing with any estate agents, landlords or utility companies chasing for when their bills will be paid.
The solution? Income protection.
Income protection is a long or short term insurance policy that gives you a regular income should you be unable to work due to accident or sickness. This can be set to cover you until you retire or are able to return to work. You set the budget and I can build a package to keep you protected. This is available to all employed or self employed people. I will review this with you on an annual basis so any changes to income (for example a pay rise) can be factored in to ensure the policy is fit for purpose.
Losing your income could have a devastating impact on your family. Protecting yourself against life’s “what if’s” can give you peace of mind if the worst happens
If you currently have an insurance policy for income protection, you may have heard of the term own occupation. This is the occupation the claimant was in when they stopped working. This may be due to you suffering a disability where you are unable to perform the majority of your occupational duties you were able to perform prior to an accident or medical incident. If this is the case, you should be able to claim on your income protection policy. The insurer will work with you where possible to get you back into work. Where this isn’t possible, you have peace of mind knowing you receive a regular income up until retirement (if this option was completed at application).
Guardian have reported more than one in four 20 year olds will be out of work for at least one year due to a disabling condition before reaching the average age of retirement**
What would happen if you were unable to work for a year? A decade? What would happen if you could never work again?
Whilst there are state benefits available, these are means tested meaning there is no guarantee to entitlement. The other thing to factor in is the amount. If you are earning a significant monthly income, would state benefits offer you the same amount to pay all of your bills and maintain yours and your families lifestyle?
We don’t like to think about our own immortality however, this is a reality for so many households. By taking an income away, the effect this can have on your and your families mental health can be huge. By having a strategy in place such as an income protection policy, you know if anything were to happen to you and you were unable to complete your occupational duties, you have an insurance in place to give you a regular income and protect your family, house, bills and savings.
With insurance, the older you are when you take out a policy, the more likely the premium will be higher.
Age is a primary factor when taking out insurance. For every year of age the policy tends to increase on average by 8% - 10%. That can be quite a jump! Ultimately the older you are, the more likely you are to become ill or to pass away. This is why putting off having insurance policies is only costing you more in the long run.
To give you a comparison of how age pays a part in insurance premiums, below are a couple of examples. Please note, this is not a real client**
Life and critical illness insurance amount of £250,000 on a decreasing basis over 30 years to run alongside their mortgage
Policy includes terminal illness cover and waiver of premium
If client took the policy out at 25 years old they would pay £27.10 per month
If the client took the policy out at 40 years of age they would pay £86.55 per month
A difference of £59.45 per month. If we base that over a 30 year period, that’s a total additional cost of £21,402. As you can see, holding off taking your insurance policies will cost you more in the long term.
When was the last time you looked at your mortgage and insurance policies?
**Test client data
Non smoker
Age 1: 25 years old
Age 2: 40 years old
At point of application for your insurance you will be asked to disclose your full medical history. If you have any existing medical conditions, these will need to be noted on the application. The insurer will likely want a medical report from your GP and from there they will could offer the policy at the original quotation, rate the policy meaning they add a % to the premium, exclude that condition from the policy meaning you would be unable to claim for this specific condition or decline the policy altogether.
The insurer may want you to complete a medical. This is normally arranged by them at their cost and they can work around you and your schedule when booking an appointment. They will want to test things like blood pressure, BMI, cholesterol and blood sugar levels.
Providing accurate information at stage of application not only ensures the policy will pay out in the event of a claim (not disclosing information will invalidate the policy), it also speeds up the process meaning the insurer has all the facts from the beginning.
During the fact find stage with me, I ask about any pre-existing medical conditions. If you have something, I can then discuss with various insurers at application stage so I know who would accept, who may decline and who may rate the policy to add to the monthly premium. If the policy is rated, I can then give you an idea of what this would look like. Remember, every insurer has different criteria. Just because one insurer may decline the condition, doesn’t mean all of them will. We also work alongside a specialist insurer who deal with the high risk, quirky and non standard clients. In their words they “insure the uninsurable”.
Don’t be put off for enquiring about insurance due to pre-existing medical conditions. There may be a solution.
Index linking your income protection policy means you are protecting the policy against inflation. When you first take out the policy, it is based on your current monthly income and outgoings. However, as time goes on and the cost of living increases, your outgoings will also increase. How do you therefore inflation proof your policy? The answer to this is index linking.
This does not mean creating wealth. Your income protection policy can not be over your monthly income. Typically for employed clients, income protection is 65% - 80% depending on the insurer of your gross monthly income.
How index linking works is it will track either the CPI (consumer price index) or the RPI (retail price index) which are official indexes from the Office of National Statistics. Your income protection cover and monthly premium will be reviewed annually in line with the insurers chosen index and if necessary will be increased in line. It tends to be if the amount of cover increases, your monthly premium will increase. This doesn’t mean you have to shop around like with car insurance. The provider will remain the same for the duration of your policy.
Just before the anniversary of your policy the insurer will write to you to confirm if there will be an increase to the sum assured or monthly premium. Even if you have chosen to index link the policy, you can decline this increase if you want to. I would always recommend seeking advice if you are looking to decline.
With all insurance policies, the element of risk to you becoming ill and having to claim will always have an impact on your monthly premium. Smoking is one activity that will increase the amount you pay each month.
What happens when you give us smoking? For some insurers, they will review your policy. Providing you have not smoked for a minimum of 12 months, they will reduce the premium as if you were no longer a smoker therefore saving you money each month without having to apply for a new policy. You may have to have a cotinine test to confirm this, arranged by the insurer.
Some insurers view vaping as different to smoking. If you are using e-cigarettes that contain no nicotine, you may be treated like a non smoker providing you haven’t smoked tobacco based products in the last 12 months.
If you fall into any of these categories and you have existing insurance policies, let me review them today. I can speak to the insurers on your behalf to see if we can save you money on your current premium. You may want to keep the premium the same and increase your coverage?
What ever the objective, let me conduct a full financial review with you to ensure your insurance policies are still fit for purpose and if I can save you money on your monthly premium.
What is terminal illness cover?
A terminal illness is one that has no known cure or has progressed to the point where it cannot be cured and is likely to lead to death within 12 months. Most insurers have terminal illness cover automatically included in your life insurance policy at no extra cost. This is not an additional pay out to life insurance, it will pay out if accepted in replacement of your life insurance policy.
The difference between terminal illness and critical illness is that critical illness pays out after diagnosis of specified critical illnesses, insurer dependant, and does not necessarily result in death. Terminal illness however, means death is likely to occur within a 12 month period. Critical illness cover can also pay out leaving the life insurance policy in tact (if you have life insurance included) however terminal illness cover pays out instead of life insurance.
For terminal illness cover the cash lump sum is paid out on receipt of a valid claim. You can then decide how you wish this money to be spent.
It is not a replacement for critical illness cover. Whilst terminal illness cover is a value added benefit to your life insurance usually at no cost, critical illness cover has additional benefits such as children’s critical illness cover, global treatment cover and can have life insurance to run along side it. Anyone at any age can suffer a critical illness. Having a plan in place should this happen will help ease some of the financial stresses. A lump sum payment is made in the event of a claim and this can be used as you please. It may be to pay off the mortgage in full or a lump sum off the mortgage, reducing your monthly outgoings. It may be to cover rental payments. Child care costs if you or your partner has to give up work. It may pay for private medical treatment or to make modifications to your home should you need long term care.
If you do not currently have a critical illness or life insurance policy in place, or if you have an existing policy in place and not sure what you are insured for or if it includes the added benefit of terminal illness cover, contact me today to book in a full and thorough financial review.
Don’t get caught out by life’s what if scenarios. Let me help you protect yourself and your family.
When conducting a fact find with my clients, a question I always ask is what would you do if you lost the ability to earn an income? A common answer to this is claiming a form of government support. Whilst we are fortunate enough to have a government support system in this country to help people in need, there is no automatic entitlement. It is means tested so there is not guaranteed amount or acceptance. If you do not replace your income and have to take a large drop financially, how can this effect your outgoings?
The government does have a mortgage support system in place called SMI (support for mortgage interest) which currently pays the interest on up to £200,000 of the mortgage however this is a loan. You will be expected to pay this money back with additional interest. There are several restrictions on who is eligible for the scheme meaning this is not a benefit that can be relied on if you are unable to work due to accident or sickness**
A guaranteed way to protect yourself if you are unable to work is to have an income protection policy in place. Income protection is a long or short term insurance policy that gives you a regular income should you be unable to work due to accident or sickness. This can be set to cover you until you retire or are able to return to work. You set the budget and I can build a package to keep you protected. This is available to all employed or self employed people. I will review this with you on an annual basis so any changes to income (for example a pay rise) can be factored in to ensure the policy is fit for purpose.
Losing your income could have a devastating impact on your family. Protecting yourself against life’s “what if’s” can give you peace of mind if the worst happens, you have it covered.
Many insurance policies come with fantastic value added benefits at no extra cost to your monthly premium. This can be in the form of mental health and wellbeing support, debt management advice, legal advice, children’s critical illness cover and terminal illness cover to name but a few. Taking advantage of these benefits does not class as a claim on your insurance so will not affect the policy in any way. These benefits are not just available to you – your immediate family can also take advantage.
Some insurers want to work with you to keep you fit and healthy by offering discounts on Apple watches, Garmin devices and gym memberships. You earn points for keeping active. The more points you earn, the more you can qualify for such as free cinema tickets and money off retailers and restaurants and weekends away.
If you already have an insurance policy in place, do you know what added benefits you have included in the policy? Let me review them today and conduct a full financial review with you. I can outline exactly what you have, what you are insured for, what your policy offers you in terms of additional benefits, if your policy is in Trust and most important of all, if the policy is still fit for purpose.
Waiver of premium is a benefit that can be added to your protection police. It protects the policy if you are unable to work due to health reasons which might make keeping up with your monthly premiums difficult.
Most insurers will require you to be off for a certain amount of time before you can activate the waiver of premium benefit. This is typically a 3 – 6 month period but is dependant on the insurer. This is known as the deferred period.
Waiver of premium will last for as long as you need it to. As soon as you are able to go back to work, you reach a maximum age (usually 60 – 65) or your policy ends, the waiver of premium will then stop.
This is a fantastic benefit and worthwhile adding to your insurance policies. It is especially prevalent with life insurance. Death can a lot of the time be proceeded by long periods of sickness. Having waiver of premium in place means you have peace of mind the policy is still in place and you do not need to worry about the financial means to pay the premium, once you are outside of the deferred period.
Does your existing policy have waiver of premium? Contact me today and let me review your policy to see if it is fit for purpose. If you do not currently have any protection policies in place, now is the time to act and let me help protect you and your family.
Fracture cover is an add on policy for some insurers for life insurance, critical illness insurance, income protection or rental protection.
Fracture cover will pay out a sum of money should you experience different types of fractures, joint dislocation and ligament tares. Each insurer has a different list of claim definitions and amounts. For example, Legal and General will pay out between £2,000 and £7,500 depending on the injury. This can be claimed multiple times over a 12 month period. It also does not class as a claim against the original policy so will not effect the premium or amount of sum assured. This money can be used for what you want such as loss of income, child care costs or transportation to hospital appointments.
This is one of many additional extras you can add to your insurance policies that give you additional financial protection at a small cost each month.
Do you know what additional extras come with your existing insurance policy? When was the last time this was reviewed? As we all know, life changes and there may be some significant changes to your lifestyle since your insurance policies were taken out. You may have started a family, in which case do you have children’s critical illness cover as part of your critical illness policy? You may have started playing football?
Have you got fracture cover added on to any of your policies? What ever the changes, let me review your policies to ensure they are still fit for purpose. I may be able to save you money on your monthly premium or increase your cover for the same amount each month.
During the fact find stage with my clients, I ask some difficult questions.
What would you do if you lost the ability to earn an income? What would you do if your partner was to die and you had to pay the mortgage and household bills on one salary? What would happen to you financially if you were diagnosed with a critical illness? What would happen if you had to take time off work to take your partner to hospital appointments?
Whether you are employed or self employed, it is so important to look at protecting yourself and or your family should life’s what if scenarios happen. Insurance can be a daunting process for many people. There are so many insurances and insurance companies in the market, how do you know what is best for you?
This is why speaking to me is so important. As a financial consultant, I will conduct a full and thorough fact find with you to ascertain details about your life, lifestyle, finances and “emergency planning”. We will run through a budget planner together and create a budget of what you are prepared to pay each month for your insurance. I will then go away and conduct research. I will be speaking to different insurance companies on your behalf to find the right insurance for the right premiums to meet your requirements. It is my duty of care as an adviser to make you aware of the consequences of not being able to meet your financial commitments and what impact that would have on you, your family and your mental wellbeing.
If you already have policies in place, I can review these to make sure they are still fit for purpose. You may have had a change in circumstances since you took out the policy such as giving up smoking or losing weight. This could therefore reduce your monthly premium. You may have started a family. In which case there may be child specific add ons you wish to have. You may be planning to start a family. Some insurers will protect you from 24 weeks pregnant should anything happen to your child.
What ever the reason, let me review your policies so you have peace of mind you are covered in the right way for the right amount per month.
Every insurer has their own set of criteria that can affect your monthly premium, sum assured or ability to be insured by them. I work with a number of fantastic insurers and have direct contact to their business development team. This means for the more complex cases my business development manager will offer support by speaking to underwriters before the application is submitted so we can get an idea if the policy will be accepted and at what terms.
After completing a thorough fact find with you I go out to the market for find the best insurance package to meet your budget and requirements. I gain an insurance decision in principle from the insurance companies before an application is submitted so I can see the lenders that will accept, possibly decline or possibly add a % to the premium. That way I ensure you are getting the best value for money with the right insurer. To do this on your own or through a comparison site would take hours. You may not be able to speak to the insurer directly. There may be exclusions you are not aware of. By using me, I can complete all the research and conversations with insurers on your behalf which saves you time. I also do not charge for insurance advice meaning this service is completely free to you**
AIG, Aviva, British Friendly, The Exeter, Guardian, Holloway, Legal and General, LV, Royal London, Scottish Widows, Vitality and Zurich are all part of our insurance panel. These insurers also offer us regular continued professional development meaning I am up to date on their product offerings.
If you already have an insurance policy in place, do you know what you are insured for? Let me review today and conduct a full financial review with you. I can outline exactly what you have, what you are insured for, what your policy offers you in terms of additional benefits, if your policy is in Trust and most important of all, if the policy is still fit for purpose.
Thank you to Victoria Bennett for providing this detailed protection glossary.
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