The loss of a spouse or parent can leave dependants with additional issues to cope with other than the emotional. If you are inadequately insured, your dependants may be left with a dramatically reduced household income, which could affect their quality of life. Potentially there may be reduced opportunities for children such as the ability to pay for a university education or difficulties in maintaining mortgage payments on a reduced income.
In the event of your death, a lending institution will not write off your debt. Rather, they will continue to pursue the debt through your dependants and could, ultimately, foreclose on the loan meaning the loss of the family home.
The main benefits the State may provide are the Widowed Parent's Allowance and Child Benefit. Depending on whether the widow(er) qualifies for Income Support, the State may or may not help with paying the mortgage interest.
The method for calculating which benefits an individual may qualify for is extremely complicated. More information is available at the Department of Work and Pensions website www.dss.gov.uk.
Under normal circumstances you Life Cover will not pay out anything to you if you are ill. The policy is only designed to cover you for death and as a result will only pay in this circumstance.
Critical illnesses are more common than people tend to believe and can affect anyone at any time. A number of critical illnesses are being diagnosed at a younger age. In fact in 2009 the average age of critical illness claimants was just 44 years old.
Approximately 89,000 people under the age of 65 will have a heart attack in the UK this year. Up to half of these people won't return to work.
The most common cause of cancer for men aged between 20-39 is testicular.
Around 125 women are diagnosed with breast cancer every day in the UK.
Policies can include something called 'Terminal Illness Cover' which will allow, at the insurance companies discretion, a payout of your policy early if you are diagnosed with a terminal illness where you will die within 12 months.
This is offered as a goodwill gesture by the insurance companies to allow you the opportunity to settle your affairs and make your own arrangements before you die.
It is important to understand that this is not the same as Critical Illness Cover and will only be offered for conditions where your doctor has told you that you will die within 12 months.
Taking Life and Critical Illness Cover together can provide a great method of ensuring you are fully protected against the eventualities of death and contracting a critical illness such as a heart attack or stroke. It can also serve to reduce Critical Illness premiums compared to taking a Life Assurance and Critical Illness Cover separately.
Your policy can include an option called index linking which allows it to increase on an annual basis to offset the effects of the years inflation and increases in the retail price index.
This is important because as time goes by the real time value of your payout will decrease. That is to say that what you can buy for £100,000 today will not be the same in ten years time. Index linking your Life Assurance policy will allow it to maintain that value.
At the time of your death your family will obviously be upset and whilst thinking about your insurance payout will probably not be the first thing they want to think about, it may be necessary to cover your funeral expenses or pay off your mortgage. As such it is important that the process for ensuring your family is paid quickly is in place.
Normally your life insurance payout would be paid into your estate and left to the process of probate to decide how it should be divided up and used. Unfortunately probate can be a lengthy process (at times up to 6 months) especially if your will is contested.
One way to avoid the probate procedure for your life assurance is by having your policy written into trust. Writing your policy into a trust allows you to nominate to whom the payout should be made, meaning that it is paid by the insurance company much faster to exactly who you intended it to go to.
As an added benefit, writing your Life Cover policy into trust can also help to limit the effects of inheritance tax on your estate because the payout would no longer form part of the estate.
Having your policy written into trust can normally be done at no extra charge as long as you include it on the application of the policy itself.
Inheritance Tax Planning advice is not regulated by the Financial Conduct Authority
You must be careful with this - make sure that you do not insure your buildings for the market value of your property. You are insuring against the fact that the building has to be demolished, the site cleared and then your property rebuilt. You wont have to buy the land again, so as a result the rebuild cost is typically much lower than the market value. If you insure for the market value you are wasting your money and over insuring yourself! More information on rebuild costs can be found from the Association of British Insurers website http://www.abi.org.uk
You would be wasting your money, by lying on the proposal form you would invalidate the contract between the insurer and yourself, so no part of the policy would be valid. This also means that if you have a mortgage on your property you are probably breaching your mortgage lender's terms and conditions by not having insurance in place.
IPT means Insurance Premium Tax. This is levied on insurance policies sold in the UK. Household Insurance is subject to IPT at 5%, Travel Insurance is taxed at 17.5%.
In order to buy insurance you must have an 'insurable interest', basically you have to own whatever it is you are trying to insure. In this case if you rent your accommodation you will not, in most circumstances, own the building. As a result you cannot insure it, you can only insure your own personal belongings within the building.
Insurers will apply a clause in your policy called average. Essentially this means that if you insured your contents for £20,000 and they were actually worth £30,000, you are underinsured by 1/3. As a result if you put in a claim for £10,000 the insurers would only have to pay you 2/3 of the claim (assuming it was valid etc), therefore you would receive a claims settlement of £6,666, not the £10,000. As a result it is important that you insure for the correct amount. Underinsuring will result in any claims being restricted on their payout. This clause is very common in domestic policies, but not many people actually know about it... until they have to claim and have got their sums wrong...don't say you've not been warned!
Basically your house contents are anything that you would reasonably take with you if you moved - your bathroom suite wouldn't be considered to be your household contents for example. Another way of thinking about it is to imagine picking up your house and shaking it - everything that would fall out is considered to be your contents.
New for Old means that the insurance company will replace the item you are claiming for with a brand new one of the same make and specification.
This can be considered as jewellery, articles containing gold, silver or other precious metals, cameras, binoculars, watches, furs, paintings and other works of art, collections of stamps, coins and medals.
Legal cover is not usually compulsory on home insurance, but this can provide you with legal assistance for personal injury cover and consumer disputes. So for example, if you walked past a building site and were hit by a brick, the insurance company could pursue a claim on your behalf against the building company for personal injury.
This information would be available on your Policy Schedule and the amount can be chosen prior to application.
Your contents, personal effects, fine art, antiques, jewellery and watches are insured against loss or damage - including accidental damage - while you're at home or anywhere in the world.
Personal effects are property used for domestic purposes or for occasional business use. You or your family should either own them or be legally responsible for them.
They can include:
clothing, including motorcycling suits, furs, glasses, contact lenses and hearing aids, baggage and other items carried about the person, photographic and mobile phones, electronic equipment, sports equipment and bicycles, musical instruments
Independant Financial Advisor
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