Protection Insurance: choosing the right policy and cover
To get your insurance right, you need to work out how much cover you need to protect your loved ones in the short, medium and long term, and also make sure you the proposed payments are affordable both now and in the future. Here’s are the types of policy's available to you:
Level Term Life Insurance
Your policy lasts for a set number of years chosen by you and in simple terms it pays out if you die during that term of the policy. Most people with dependants and those with a mortgage see this as a minimum amount of protection required to protect their loved ones.
Decreasing Term Life Insurance - Mortgage Protection Policy
Designed to be linked to a repayment mortgage where the outstanding balance decreases over time. Your policy lasts for a set number of years and it pays out if you die during that term. But for each year that goes by, the potential payout decreases. The term chosen is generally to match that of your mortgage term and typically covers only the mortgage balance.
Those with a repayment mortgage whose dependents can manage other future ongoing expenses on their own in the event of your premature death would consider this policy type.
Critical Illness Insurance
Critical illness insurance is a complex product and be added to the level term or decreasing term policy as an addition benefit for an additional cost. Premiums, exclusions and payouts can vary greatly, so it pays to get some expert help from an Instinct advisor when deciding which policy to buy.
With critical illness insurance, insurers charge higher premiums if they think you’ve got a higher risk of getting one of the specified conditions. The more likely it is, the more you’ll need to pay for cover.
On some occasions, insurers will assess your overall risk by requesting medical details from your GP or asking you to undergo a local medical examination. Generals, critical insurance providers will try to gauge your risk overall risk through an application form that asks about your age, smoking habits, your health and medical history and your lifestyle.
Family Income Benefit - what is it and what does it do?
Family Income Benefit is similar to a traditional life insurance policy although rather than pay a lump sum on death it pays out a monthly income to your chosen dependants / beneficiaries. Like most life insurance policies you can add Critical illness cover and this would produce an income in the event of certain serious illnesses being diagnosed. Therefore the claimant would not have to die for a claim to be made.
The income paid is normally tax free and the money from your life insurance payout can be used for whatever purpose your beneficiaries choose.
These policies are suitable for people who wish to protect against the loss of an income currently provided by either or both parents in the event of death or critical illness.
Family Income benefit plans can used for a number of other reasons, for example they can form part of divorce settlements. When divorcing couples agree on an acceptable monthly maintenance payment, the significant financial impact of death of either parent whilst their children are still dependant is often not considered. With best advice and effective planning and by proceeding with a family income benefit policy the recipient of the maintenance payments is fully protected should the insured unfortunately die before the children become fully financially independent.
If you choose a Family Income Benefit Life Insurance policy your dependants or chosen beneficiaries will receive an monthly income from the time the insured dies to the end of the policy term. Premiums can be paid monthly or annually by direct debit from your bank account.
Get advice and a quote on Family Income Benefit now.
Whole of Life Insurance
You may not think you need as much life insurance once you’ve retired or paid off your mortgage. But the need for cover doesn’t necessarily end entirely. When you die your loved ones could still be faced with a loss of income and immediate costs such as funeral costs and inheritance tax.
The benefits of choosing Whole of Life insurance are:
- Life long protection (unless you cancel your policy)
- Level premiums that won’t increase with age (or you can choose to index your cover to ensure it keeps up with the rate of inflation)
- A guaranteed payment on death paid to your loved ones (usually your beneficiaries)
The key difference between whole-of-life insurance and term insurance is that term insurance only runs for a set period chosen by you, typically 25 years. If you were to die in that time, it pays a tax-free cash lump sum to your loved ones and / or chosen beneficiaries , but if you live beyond the term, your plan has no cash-in value. You won’t get any return on your premiums. With whole of life the policy will be guaranteed to pay out so long as you don't cancel the policy.
Mortgage Payment Protection Insurance
If you want to protect your monthly mortgage payments from unexpected events or unforeseen circumstances, then look to Instinct financial solutions to learn more and get the best advice.
MPPI is designed to cover your mortgage payments if you're unable to work due to accident, sickness or unemployment. For a monthly premium a MPPI policy pays you a set amount each month, usually for a period of your choice such as 12 or 24 months.
As MPPI only pays out for a limited period you therefore may want to consider alternatives to MPPI such as long term income protection. For Mortgage Payment Protection Insurance and Accident, sickness and uneployment plans we act as introducers only.
This Payment Protection Insurance is optional. There are other providers of Payment Protection Insurance and other products designed to protect you against loss of income. For impartial information about insurance, please visit the website at www.moneyadviceservice.org.uk
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Long Term Income Protection
Long term Income Protection, however, will usually provide a regular income if you are unable to work due to illness or disability until you are well enough to return to work, or until the end of the policy term. Unlike most Short Term Income Protection policies such as MPPI it will generally not provide you with cover if you were to become unemployed or made redundant. Due to the complexity of these products we highly recommend you take advantage of our free service and contact us today and allow one of our advisers to discuss your specific need.
Buildings and Contents Insurance
If you’re worried about what you’d do without your valuable belongings, At instinct we can advise you on how best to protect your home and its contents from loss and damage.
Additional cover can be added to your policy in the form of home emergency, accidental damage, personal possessions cover and legal expenses.
For more information or to arrange a no obligation consultation please get in touch today!