Insurance Protection can come in many forms and also mean different things to different people.
Below are some of the more common areas to consider.
GENERAL TYPES OF INSURANCE
Personal protection is an important part of most people’s financial planning. Each client will have different needs and require different products. Main areas of consideration are:
Life protection will pay out a lump sum if the people covered by the policy die or are diagnosed with a terminal illness before the end date. This can be used to pay off a mortgage or loan, ease financial worries for a client, a client’s family or even protect a business.
Income Protection means clients will get a regular income if they’re unable to work due to long term sickness or accident. They’ll get a monthly income for as long as they need it (or until the policy ends, whichever is sooner); which means they won’t have to rely on their savings, state benefits or statutory sick pay.
Critical Illness Protection
Critical Illness cover pays out a lump sum if a client is diagnosed with one of a defined range of critical illnesses during the term of their policy and then survives for at least 14 days. Some policies may include additional partial payments for the less threatening conditions. It’s important to understand that a client is only covered for the illnesses defined in the policy conditions and no others. Cover could be used to help pay off a mortgage, support their family or help with extra medical or living costs.
Family Income Benefit
Family Income Assurance is term insurance which provides a tax-free income paid at regular intervals to support family & dependents, if a client dies or is diagnosed with a terminal illness during the term of the plan.
Using the appropriate trust with one of the protection policies will make sure that the right people will receive the money, at the right time without delay and usually without inheritance tax (IHT) liability. However, there are different types of trust available and it may not always be clear which should be used or the best way of setting it up. To help you, I’m able to provide information, guidance and forms for the most common types of trusts.
Trust Advice is not regulated by the Financial Conduct Authority
Business protection could help client owned businesses continue to trade should a key person or business owner die or become terminally or critically ill. Proceeds from the policy could help ensure that key individuals are replaced, corporate debt is protected and shares from the deceased partner’s/director’s estate are purchased.
A business trust is normally used to make sure that if a partner or shareholder dies, the payment from a life protection policy is paid out to the remaining shareholders or partners in a firm. This money can then be used in conjunction with a single or double option agreement to buy back the shares of the company from the deceased partner/shareholder’s estate.
This is usually done to keep control of the company with the remaining partners or shareholders. Otherwise the share/shares can be passed on to a spouse, children or other people who could have a say in how the business is run, and this may not be agreeable to other shareholders or partners in the business.
Please note the above is by no means an exhaustive list of protection products. It is important to treat each individual circumstance based on its merits and make the appropriate recommendation. You can contact us at EP Wealth Management for a personalised review.
BUILDINGS & CONTENTS INSURANCE
Buildings and contents insurance is placed under the bracket of home insurance. It is a combined insurance that will cover or replace any damage that might occur to the house or its contents, including loss. It is essential for all mortgaged houses, and the majority of other homeowners who do not have a mortgage will also have this type of insurance. It is possible to get the two insurances separately, although you will find that most providers offer them as a combined cover.
Buildings insurance covers the structure of the building such as the walls, roof, floors, ceilings, windows and doors from damage. A buildings insurance policy should cover funds to rebuild your house in an event of it being completely damaged beyond repair.
The damage can come in many forms such as:
- Weather damage such as lightening, storms etc
- Bursting of pipes
- Falling trees
Make sure to check that you are not living in a high risk area of damage such as flooding. You may have to pay extra on your policy if you are but you will get peace of mind knowing that you are adequately covered.
Many building insurance providers also cover you for garages, conservatories, greenhouses, fences etc. Make sure you check the policy to see what you are covered for. Policies may also cover permanent fixtures and fitting including cupboards, toilets, baths and kitchen units and again it is important to check what your policy covers. Always shop around for the best building insurance and not the cheapest as you may leave some important items uncovered under the policy. Unfortunate accidents may happen to your property from time to time so it is imperative that adequate cover is taken out to protect your home.
Why is home insurance needed?
As our homes are the most important asset that we are ever going to own, it is imperative that adequate home insurance is taken out for your property. You will never know when you will need to claim under your home insurance so it is best to make sure you are covered properly.
Statistics show that 1 in 4 people in the UK will get burgled during their lives but people still choose to ignore this and don’t get any protection whatsoever. Other unforeseen circumstances such as floods and fire may also wreak havoc among your possessions and by not getting covered properly you are taking a big risk in losing out financially. There are two types of home insurance; Buildings insurance and contents insurance. Buildings insurance is a mandatory condition when taking out a mortgage and lenders will insist that this insurance is in place. This will protect the house being damaged from events which cannot be repaired.
Contents insurance is not usually a mandatory requirement when taking out a mortgage, but it is in our own interest to secure your personal belongings as you have worked hard for them and if anything was to happen then you will be kicking yourself.
Contents insurance covers your household possessions such as jewellery, electronic goods, furniture, carpets and clothing against theft, loss and damage. Contents insurance is not necessary but it is essential if you want to protect your valuables which you have paid a lot of money for over the years.
Generally, there are two types of contents insurance available; indemnity policy and ‘new for old’ policy. The indemnity insurance is the cheapest available and covers items by a wear and tear policy. For example, if a carpet was spoilt by paint then the claim would reflect how old the carpet was and pay out accordingly. On the other hand, ‘new for old’ policy is more expensive but would pay the full amount for a brand new carpet.
Many content insurance providers offer an accidental damage option as standard but usually you will have to pay extra if you want this cover. Cover for extra items can be bought if needed such as expensive jewellery, antiques and also your fridge freezer in case of power failure which means you can claim for the contents of your fridge.
Home contents insurance can also include the following things that don’t necessary stay at home:
- Mobile phones
Always check with your home insurance contents provider for what you are covered for under your policy or read the small print that is attached with your paper work. Bear in mind that it is possible to combine buildings and contents insurance together and obtaining a quote. This will often get you a good deal and save you hundreds of pounds.
Home insurance for landlords
Landlord insurance is the same as normal types of home insurance that everyday people apply for. All landlords need buildings insurance for the property that they may own but contents insurance is not essential as it will depend on how the property is equipped. Landlords should conform to the list below to help minimise risks that property letting may involve:
Landlord liability – This covers for injuries that the person living in the rented accommodation my claim for against the landlord. If conditions are dangerous in the rented accommodation as a result of negligence on the landlords behalf then this could affect the claim. Emergency assistance – Protection against call out fees for contractors carrying out work for emergencies. These may include roofing damage, heating problem, lost keys, plumbing etc
Extra cover – For example, loss of rent due to the tenant not paying up. Additional cover could also help in these circumstances.
Property Insurance Q&A
How much should I insure my buildings for?
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
If I told a little white lie on my application to keep the premium down, would it matter?
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.
What is IPT?
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%.
I live in rented accommodation, can I insure the buildings?
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.
I guessed how much to insure my contents for. What happens if I underestimated?
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!
What counts as my household contents?
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.
What does New for Old mean?
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.
What is a ‘valuable’?
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.
Why should I have legal cover on home insurance?
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.
Do I pay an excess if I make a claim?
This information would be available on your Policy Schedule and the amount can be chosen prior to application.
What does ‘All risks, worldwide’ cover mean?
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.
What is meant by ‘personal effects’?
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