Mortgage Protection Life insurance, also known as Term Insurance, will provide a sum of money in the event of death during the term of the policy. This cash lump sum is paid tax free and can be used by your dependents however they choose. A Decreasing Term Assurance policy pays out a cash lump sum in the event of death, however the amount paid out decreases over time. These policies are usually taken alongside a repayment mortgage so that the amount paid out is the same as the amount left on the mortgage.
Critical illness insurance will provide a tax free cash sum in the event that you are diagnosed with one of a set list of critical illnesses (most policies cover 30-40) where your diagnosis meet the providers definition. This cash sum can be used however you need to use it, it could be used to clear a mortgage or it could be used to replace a lost income, to pay for private treatment or for whatever else you feel is required. Essentially it is there to make a really difficult time a little bit financially easier and to allow you to concentrate on what is really important like getting better or spending time with the family rather than worrying about the money side of life. Like life cover, critical illness cover can be a fixed (or “Level”) lump sum or can fall in line with your mortgage balance (“Decreasing”) and you can either take it alongside life cover or as a standalone option. You don’t even need to fully cover the mortgage balance if your budget is tight, after all some cover in the event of serious illness is better than none. There are differences between providers as to their definitions as well as the additional benefits that are available so it is not just a question of looking for the cheapest policy, but making sure you have the best level of cover you can get for your budget.
Buildings & Contents
It is a requirement of the mortgage lender that a suitable policy is in place for the completion of the mortgage. The lenders interest should be noted on the Policy Certificate and a copy provided to the Solicitors acting on your behalf.
It is a good idea to check and make sure there aren’t any barriers in place that could cause problems further down the line i.e. being unable to obtain insurance because the property is in a Flood Risk area.
An Income Protection policy pays out a monthly income to replace a proportion of your salary in the event that you are unable to work as a result of an accident or sickness. It will pay out after a set amount of time has passed (decided by you at the start of the policy) and will continue to pay until you are either well enough to return to work, you reach retirement age or the end of the policy term. This means that you have the peace of mind of a regular on-going income to maintain your lifestyle should you fall ill or have an accident and need to take time off work. Importantly, this income cannot be affected by state benefit cuts.
Accident, Sickness & Unemployment
This cover is a short-term income protection policy. It’s designed to pay you a tax free monthly benefit for up to 12 months, if you can’t work due to an accident, sickness and/or involuntary unemployment.
Family Income Benefit
Family Income Benefit is designed to pay out an amount of cover in the event of death, but instead of providing a one-off cash lump sum like standard life insurance, it pays a regular, tax-free income until the end of the policy term. This can be a suitable option for people who would rather that their dependants receive a regular income, rather than have to decide what to do with a one-off lump sum. The term of the policy can be chosen to fit your family’s circumstances; for example to take your youngest child to age 18 or 21 and the amount of cover you chose can be linked to inflation to ensure that, in the event of a claim, the benefit keeps its real value and spending power. Family Income Benefit is a relatively affordable way of ensuring that your family can maintain the lifestyle you want them to have, whether you are around or not.
Making A Will
The Financial Conduct Authority (FCA) do not regulate will writing.
If you die without a Will, you are deemed to have died “intestate” and the law (rather than you) decides who inherits your estate. If you are intestate your estate will be split depending on its value to family members including your partner (if married), children, parents and siblings. If unmarried and intestate your grandparents can also benefit. If there are no relatives found the property passes to the Crown. You may not want that.
Making a Will is the only way to ensure that your wishes are carried out after your death. If you make a Will, you can:
- Decide how much money is left to each of your family members
- Specify who will become the guardians of your children
- Pass your estate to an unmarried partner
- Choose who you want to be the executor of your Will
- Leave something to charity
- Give a memento, like a piece of jewellery, to a treasured friend
- Ensure children from a previous relationship receive legacies