Category Archive Insurance & Protection

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MAP Newsletter – Quarter 3 2020

Check out the latest financial insights for the third quarter of 2020 using the reader below.

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MAP Spring 2020 Budget Highlights

Check out our highlights of the Spring 2020 Budget from 11th March 2020 using the reader below.

2020-Spring-Budget

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MAP Newsletter – Quarter 2 2020

Check out the latest financial insights for the second quarter of 2020 using the reader below.

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Buildings & Contents Insurance

Buildings and Contents Insurance can be bought either together to incorporate insurance for both aspects named in the title, or in part, to provide cover for just a building or just the contents of a building.

This type of policy is designed to provide benefits as and when claims are made against the loss of or damage to a building or the contents therein. Claims must be sufficiently sizeable to warrant a pay-out and will be judged by an assessor from the insurer, to check its validity.

If purchasing buildings and contents insurance (as opposed to just one or the other) you will have one premium but two sum assured amounts; one for the building and one for contents. This is the maximum the insurer will pay out in any one claim. Therefore, the sum assured for the building will be considerably higher than that for the contents.

B&C insurance can sometimes be compulsory if putting a mortgage on a property and the lender requests it be in place as a condition of the loan. Otherwise, like any insurance, you have to make a considered judgement about whether you think it is likely you will have to claim during the life of your loan. If the worst happens and you have to call on your insurance, then it can be money well spent.

The policies have a fixed term of twelve months, and are reviewed annually by the insurer. At this point, it is normal for renewal terms to be issued and the insurer will write to the policyholder directly in this regard on each anniversary of the policy, offering the opportunity to alter the terms of the contract to suit their requirements.

The premiums can be reduced by not having any claims for a prolonged period and increasing your excess (what you pay before the insurer does). Alternatively, premiums can be increased based on the amount being insured – larger properties and individual items of high value will almost certainly increase the premiums – or if claims are made regularly.

Premiums can be paid either upfront for the year ahead or monthly.

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Life Insurance

Life insurance, otherwise known as level term assurance, has a known level of cover that will be paid out in the event of death within a known period of time.

Premiums remain level throughout and should you survive the policy term, there will be no benefit. As this type of contract only provides cover in the event of death there is no surrender value, so if you stop paying the premiums at any time, your cover will cease.

Premiums are based on your personal circumstances but the main areas for consideration by an insurer are your age and state of health. The older you are, the higher the premium will be. Similarly if you have or had a serious ailment the insurer may seek to charge you more or in some cases be unwilling to cover you at all. Higher levels of cover and longer policy terms all increase cost as will the fact that an individual smokes.

Essentially, level term assurance is cheap cover on your life for the benefit of your family or for your business, but there are limitations to it.

As it is a fixed term, there is no flexibility and you will be unable to increase cover or extend the term. Should you therefore find yourself ill at the end of the term you may be unable to obtain further cover.

There is no investment element to the policy, and your sum assured will take no account of inflation.

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Mortgage Protection

Mortgage Protection policies, otherwise known as Decreasing Term Assurance, provide cover that matches the outstanding balance of your mortgage/loan and will pay a lump sum that can be used to pay off the remaining balance of your mortgage/loan in the event of death and/or diagnosis of a terminal illness.

Premiums can be guaranteed throughout the term or reviewable at certain intervals, but should you survive the policy term, there will be no benefit. As this type of contract only provides cover in the event of death and/or diagnosis of a terminal illness there is no surrender value, so if you stop paying the premiums at any time, your cover will cease.

Essentially, term assurance is the cheapest type of life cover and is normally used for the benefit of the life assureds’ family or business, but it does have limitations.

As it has a fixed term, there is no flexibility and you will be unable to increase cover or extend the term. Should your health have deteriorated during the term of the policy, you may be unable to obtain further life cover at the end of the term.

There is no investment element to the policy, and your sum assured will decrease throughout the policy term matching the outstanding balance of your mortgage (providing repayments have been maintained at the current level).

Some products allow you to select the interest rate to match the rate of interest on the mortgage/loan whilst others have pre-set rates, meaning it is important to review the cover if the rate of interest changes.

Premiums are based on your personal circumstances but the main areas for consideration by an insurer are your age and state of health. The older you are, the higher the premium will be. Similarly if you have or had a serious ailment the insurer may seek to charge you more or in some cases be unwilling to cover you at all. Higher levels of cover and longer policy terms all increase cost as will the fact that an individual smokes.

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Accident, Sickness & Unemployment Cover

This type of policy is designed to provide a short-term benefit towards the monthly income lost in the event of the policyholder’s earnings stopping as a result of an accident, illness or unemployment.

The policy benefits will only be paid in the event that the policyholder’s income is reduced/stops. It is not designed to pay a benefit if the policyholder continues to receive their full gross salary from their employer.

As an extension, the policy can sometimes pay a lump sum in respect of accidental death, permanent total disablement or loss of limbs, sight or hearing.

ASU Cover is not compulsory and like any insurance, you have to make a considered judgement about whether you think it is likely you will have to claim during the life of your loan. If the worst happens and you have to call on your insurance, then it can be money well spent.

The policies have a fixed-term of twelve months, and are reviewed annually by the insurer. At this point, it is normal for renewal terms to be issued and the insurer will write to the policyholder directly in this regard on each anniversary of the policy, offering the opportunity to alter the terms of the contract to suit their requirements.

The premiums can be reduced by accepting cover for only some eventualities, for example, opting to buy a certain type of cover e.g. unemployment only or disability only. This would only be prudent if the cover excluded was provided by another means.

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Private Medical Insurance

Private medical insurance provides cover for individuals who wish to seek private medical treatment outside the NHS when they are ill. This gives the individual the choice of specialist consultant, the hospital and the timing of the treatment. Unlike critical illness insurance and permanent health insurance, the contracts are renewable on an annual basis and premiums increase with the age of the client.

When looking at cover, it is useful to know that treatment is categorised in the following way:

  • In-patient – when you go to hospital for private treatment or investigations and stay for one night or more;
  • Day-patient – sometimes referred to as day-care or day-case and is when you go into hospital for private treatment or investigations but do not stay in hospital overnight; and
  • Out-patient – when you receive treatment or investigations which do not need you to stay in hospital as either an in-patient or day-patient.

There are a large variety of schemes available from low-cost budget plans offering limited cover, to those that offer wide ranging cover and benefits. Some illnesses and treatments will never be covered but the following are found in most schemes:

  • Usually included:
    • Cover for treatment of short-term (acute) medical conditions;
    • In-patient tests;
    • Surgery; and
    • Hospital accommodation and nursing.
  • Sometimes included:
    • Out-patient tests;
    • Out-patient consultations with a specialist;
    • Overseas cover; and
    • Cash payment for treatment received as an NHS in-patient.
  • Usually not included:
    • Conditions you had before taking out the insurance (commonly known as pre-existing conditions);
    • GP services;
    • Cover for long-term illnesses which cannot be cured (usually referred to as chronic conditions); and
    • Accident and emergency admission.

Conditions or treatments normally outside cover include drug abuse, self-inflicted injuries, out-patient drugs and dressings, HIV/AIDS, infertility, normal pregnancy, cosmetic surgery, gender reassignment (also known as sex change), preventative treatment, kidney dialysis, mobility aids, experimental treatment, experimental drugs, organ transplant, war risks, injuries arising from dangerous hobbies (often called hazardous pursuits).

Whichever scheme you choose, it is likely that your premiums will rise above the rate of general inflation. This is because of factors which affect how healthcare is provided in all western economies. Your choice of cover will affect what you pay, so your premiums will increase with the more specifications you make or want.

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Income Protection Insurance

Under an Income Protection Plan or Permanent Health Insurance (PHI) policy, as it is sometimes known, an income benefit would be paid to you if you were unable to work because of disability caused by sickness or accident.

The benefit is paid, basically, as compensation for loss of earnings. Benefit will normally start at the end of an initial waiting period, which is normally 4, 13, 26 or 52 weeks long and is payable until you either return to work, die or the policy term expires. The policy term is normally linked to your expected retirement age.

The level of premium for the required amount of cover will depend on the type of plan and the company chosen. Some companies offer guaranteed or fixed premiums, whilst other plans reserve the right to review premium levels or offer the potential to build up a surrender value.

For a slightly higher premium the option is normally available to have the level of cover automatically increased each year in order to potentially provide some protection against the effects of inflation.

The definitions of disability vary considerably. Generally, in order to make a valid claim, the member must demonstrate that he is “totally unable by reason of sickness or accident to follow his own occupation” or “his own and any other for which he is suited by reason of experience and/or qualifications” (known as ‘any suited’) or, indeed, “any occupation whatsoever”.

The definition of disability, i.e. whether “own occupation”, “any suited occupation” or “any occupation”, is obviously crucial for underwriting and claim purposes and will affect premium rates. Clearly own occupation offers greatest protection.

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Whole of Life Cover

A Whole of Life Assurance policy with guaranteed premiums promises payment of a known level of cover upon death of the life/lives assured whenever death occurs, provided that premiums are maintained.

The premium and sum assured are fixed throughout the life of the policy (in some cases it is possible to include an annual increase in the amount of life cover (5%, for example) which would mean that the premium also increases each year).

Some companies offer guaranteed or fixed premiums, whilst other plans reserve the right to review premium levels on a periodic basis. There is usually a small additional cost for the advantage of a guaranteed premium but with the assurance of knowing what future premiums will be.

Premiums are based on your personal circumstances but the main areas for consideration by an insurer are your age and state of health. The older you are, the higher the premium will be. Similarly if you have or had a serious ailment the insurer may seek to charge you more or in some cases be unwilling to cover you at all. Higher levels of cover will increase cost as will the fact that an individual smokes.

Whole of life cover is more expensive than term assurance cover due to the fact that the cover continues throughout life.

There is no investment element to the policy, and your sum assured will take no account of inflation unless increasing cover is selected.

In the event of you being diagnosed as suffering from a terminal illness i.e. one where the expectation of life is less than twelve months the sum assured under the contract will become payable.