INSURANCE
INSURING YOU AND YOUR HOME
It is your responsiblity to ensure that all necessary forms of insurance relating to you and your home are in place.
As well as Buildings and Contents it is advisable to insure against events that could affect your ability to meet your mortgage payments. It is important that you consider insurance cover such as Mortgage protection Plans. These cover loss of income due to accident,sickness and unemployment. They can usually be covered collectively and are also known as ASU(Accident,Sickness and Unemployment) Policies.
You should also consider the consequences of premature death and critical illness, on you and your family's ability to meet mortgage and other financial commitments.
WHY DO I NEED IT?
Insurance pays out when an unpredictable event causes a loss.You need insurance whenever:
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The law says you must have it;
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An event could happen to you and you would not be able to afford the loss - for example, if a tile fell from your house and injured someone who then claimed thousands of £s for their lost earnings;
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If an event happened, people who are dependent on you could not bear the loss- for example, if you died and your children needed the financial support you had previously given.
WHAT TYPES OF INSURANCE ARE THERE?
You can protect yourself against unpredictable risks by taking out insurance. There is almost no limit to risks you can insure against, but the most common types of insurance are listed below;
(For example car insurance, home insurance, travel insurance, private medical insurance, accident insurance and sickness insurance.)
(For example whole of life insurance, with profit bonds, unit linked bonds, income and growth bonds, endowment policies, maximum investment plans or any other life insurance, which builds up a cash-in value.)
(For example lump sum term insurance including mortgage protection policies and family income benefit.)
For the purpose of protecting your home and mortgage the following are the insurances that you should give serious consideration to:
GENERAL INSURANCE
BUILDINGS INSURANCE
House buildings insurance pays the cost of repairing or rebuilding your home if it is damaged by unforeseen events (as detailed in the insurance policy)
CONTENTS INSURANCE
House contents insurance covers the cost of replacing possessions lost or damaged due to unforeseen events (as detailed in the insurance policy)
ACCIDENT,SICKNESS,UNEMPLOYMENT,INCOME PROCTECTION AND CRITICAL ILLNESS INSURANCE
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Accident, sickness and Unemployment pays out a regular amount for a limited time- a year, say- if you can't work for health reasons or redundancy.
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Income protection insurance replaces part of your income if you can't work because of long-term illness or disability.
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Critical illness cover pays out if you are diagnosed with a Life-threatening condition such as cancer or heart attack.
LIFE INSURANCE
There are two types of life insurance- investment type and term insurance.
INVESTMENT TYPE LIFE INSURANCE
Investment- type life insurance pays out if you die and if you don't (with the exception of whole life insurance)-and may sound ideal. But investment-type policies cost a lot more than protection-only insurance. Usually, it's best to keep your insurance and investment needs separate.
If you want investments, consider the full range of products (not just life insurance), which might meet your circumstances and needs
These are all investment-type life insurance:
(To find out more about a specific investment type product, please visit the investments section of the FSA Consumer Website.)
TERM INSURANCE
If your main concern is protecting your family or other dependants, term insurance is often the cheapest way to buy all the cover you need.
Term insurance pays out if you die within a set period of time (the ''term''). If you survive the term, it pays out nothing. You might set the term at, say, the number of years until your children are financially independent, or the number of years remaining on your mortgage. It is not an investment, however, it is a low cost form of life insurance.
There are two types
Level Term Life Insurance
You can take this type of life insurance on your own or with your partner as a joint plan.
You choose the amount of cover you need and the length of the plan. The level of cover remains the same throughout the term and the premium you pay as well. This type of cover is suitable for an interest only mortgage.
Decreasing Term Life Insurance
You can take this type of Life insurance on your own or with your partner as a joint plan. This cover is designed to protect a repayment mortgage. The cash lump sum payable on the first death will repay the oustanding balance of your mortgage.
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