Mortgage Payment Protection

What Mortgage Payment Protection does:

Mortgage payment protection policies are designed to cover the cost of your mortgage payments if you’re sick, have an accident or become unemployed and can’t work.

How Mortgage Payment Protection works:

Generally, the policy will start paying out either 31 or 60 days after you are unable to work. Most policies will payout for a maximum of one year.

What you need to know:

With statutory sick pay set at just £109.40** and only payable for up to 28 weeks, many families would struggle to meet their mortgage payments if disaster were to strike. The amount payable under the policy is usually around £1,500 to £2,000 maximum per month. So, if you have a large mortgage, you will need to consider how you would cover any shortfall.

You can choose the date at which the policy would payout in the event of a claim. This can range from a month to up to a year. Policies that payout sooner will have higher premiums.*

Income Protection

What Income Protection does:

This type of policy pays a monthly income tax-free if you are unable to work due to an illness or injury.

How Income Protection works:

The monthly income under the policy will be between 50 and 70 per cent of your salary and will be paid until you are fit enough to return to work or reach retirement age.

What you need to know about Income Protection:

State benefits aren’t generous and only a few employers will continue to support their staff through a long illness, so income protection policies can help families through difficult financial times.  You can choose the date at which the policy would payout in the event of a claim. This can range from a month to up to a year. Policies that payout sooner will have higher premiums.*

Critical Illness Protection

What Critical Illness Protection does:

Critical illness cover pays out a tax-free lump sum if you are diagnosed with a major illness, including cancer and heart disease. Actual illnesses covered in a policy may vary between providers.

How Critical Illness Protection works:

Many insurers will make a part payment on an early-stage diagnosis of a condition specified in the policy, the percentage will vary from company to company

What you need to know about Critical Illness Protection:

Many people buy a combined life and critical illness policy, and it makes sense to do so. In this case, a payment would be made on either diagnosis of a critical illness as defined in the policy, or death, whichever is the sooner. If the cover is combined in this way, the policy premium is usually cheaper than it would be for separate policies, as there is only ever one lump sum paid out by the insurance company.*

Family Income Benefit

What Family Income Benefit does

Family income benefit policies work in a similar way to ordinary life cover, but instead of a lump sum, the policy pays out a regular income if you die.

How Family Income Benefit works

A typical policy might be taken out by the parents of young children, so that if one parent were to die during the term of the policy, then an income would
be paid out for a predetermined period of time. So, if you had a 20-year policy and were to die five years into it, then the policy would payout a regular income for the remaining 15 years.

What you need to know about Income Benefit

Family income benefit insurance is a simple way to provide your family with an ongoing income rather than a lump sum if you were to die. Critical illness can also be added that would provide a payout if one of the parents were to be diagnosed with a serious illness.*

Accident Sickness & Unemployment (ASU)

What ASU Protection does

This policy provides cover so that if you are unable to work because you’re injured or sick, or  through no fault of your own, you have lost your job.

How ASU Protection works

In the event of a claim, you will receive a predetermined percentage of your monthly income, usually for a period of up to 12 months. Payments are made after a  waiting period of at least a month. If you choose a longer waiting period, your premiums are likely to be lower.

What you need to know about ASU Protection

Accident, sickness and unemployment cover differs from mortgage payment protection which is designed specifically to cover your repayments on a specific debt such as your mortgage.  It differs from income protection insurance in that it includes unemployment cover.*

Private Medical Insurance

What Private Medical Insurance does

Private medical insurance means that you can get access to diagnosis and treatment faster and therefore are more likely to recover quicker. Policies cover the costs of private medical care including seeing consultants and specialists, treatment, surgery, private hospital accommodation and nursing costs.

How Private Medical Insurance works

You will need to decide what level of cover you want for yourself and your family, as this will determine what your premiums will cost. You can choose the level of excess, that’s the amount of any claim you are happy to pay yourself. Paying a higher excess will generally bring the cost of premiums down.*

What you need to know  about Private Medical Insurance–

There are conditions which insurers won’t payout for, including cosmetic surgery and alcohol or drug-related illnesses. You may find illnesses that you’ve suffered from in the past are excluded from cover as they are deemed to be ‘pre-existing conditions’.

A note about terminology

Life Insurance vs Life Assurance

The terms life insurance and life assurance are often interchangeable and both often known simply as ‘life cover’.

People often ask what the difference is, so here’s how it works:

Life insurance is cover you take out for a set number of years. You agree the term of the policy at the outset, usually between 10 and 25 years. That’s why you’ll often find this type of policy referred to as term insurance.

Most people tailor their policy to ensure that their financial commitments would be met in the event of their death, so policies are often aligned with the term of a mortgage or other loan. Banks and building societies usually require some form of life insurance as a condition of granting a mortgage.

Families often opt for life insurance to cover them whilst the children are growing up, taking a policy that will end when they become financially independent. With life insurance, you aren’t guaranteed to receive a payout as you could outlive the term of the policy. However, what you do get is the continuing peace of mind and the guarantees that protection policies give you and your family.

Life assurance, by contrast, is designed to provide cover until you pass away. It can be more expensive than life insurance as it covers you for a longer term and pays a lump sum in the event of death, whenever that occurs.*  You may have heard the phrase ‘whole life’ or ‘whole of life’ used in relation to this type of policy.