The more popularly arranged insurance types are explained. This is not a complete list and it is not intended that this should give a complete answer to all your questions, but instead it is intended that you might be better prepared to take full advantage of the service offered to you when talking to an advisor.
See our separate page about Buildings and Contents insurance.
Also known as Accident, Sickness and Unemployment Insurance. (ASU)
It is important to ensure that you will be able to continue making your mortgage payments in the event that your family income falls.
This insurance is designed to pay out a monthly cash sum if you or your spouse/partner have an accident, fall ill or are made redundant. It does not cover voluntary unemployment, dismissal following misconduct, or redundancy that was impending when the insurance cover was taken out.
The amount paid can be varied, but is normally limited to the mortgage payment and 50% of other related monthly bills.
Your need for MPPI will be influenced by the type of job you and your spouse or partner have, and whether you feel it is secure or the amount of redundancy payment you might receive and whether you would continue to be paid whilst sick and for how long.
The cost of MPPI varies according to the level of cover provided. There is normally a deferred period during which no payments are made and this can normally be lengthened to correspond, for example, with the period for which your employer would pay you whilst off sick. Once the deferred period has passed, payment can be paid for the entire period since you last worked.
You can normally opt to make provision to cover additional essential bills, but this additional cover is usually limited.
This is designed to pay an amount (the sum assured) in the event of the death of yourself and/or your partner during the period (term) you specify at the outset.
Often it is linked to your mortgage, so that the sum assured equals the mortgage debt and the term is the same as the period of the mortgage loan.
Should you survive the term of the policy then it lapses and nothing is paid to you and there is normally no surrender value at any time. For this reason it is the cheapest form of cover that you can arrange to cover your untimely death.
Its main use is to provide family protection and should be considered for both spouses or partners as the early death of either one will normally affect the ability of the other to meet all commitments. For example, the ability to repay the mortgage loan may have been based upon two incomes and it may be difficult to continue to work as before if there are family responsibilities.
Cover is provided on a decreasing-term, level-term, or increasing-term basis. The amount covered on decreasing-term assurance is reduced each year and is normally arranged to be in line with the reducing mortgage balance owed on a repayment mortgage. The amount covered on level-term insurance remains unchanged throughout and is suitable for interest only mortgages or where it is felt prudent to have a sum available to meet other lump sum commitments. The amount of increasing-term assurance is often arranged to cover the outstanding mortgage and an increasing amount to cover other commitments that may increase or over time or start later on.
This insurance pays out a lump sum and/or, if arranged, a monthly payment in the event that you or your spouse/partnerare diagnosed witha number of pre-specified medical conditions. The illness may be terminal or you may recover.
Critical Illness insurance is primarily intended to provide a means to pay off debts and for continuing payment of bills whilst ill and provide for additional costs, such as provision of care, alterations to property, purchase of medical equipment and mobility aids.
It is therefore suitable for single people as well as couples with or without dependants. It also provides cover if the main earner has to reduce working hours to care for the other spouse/partner and family.
The types of illness and conditions covered can vary, but typically includes, amongst others:
Critical Illness cover can be added to life assurance policies and in this way provide cover either in the event of premature death or diagnosis of one of the specified critical illnesses. Cover can also be arranged so that the premiums are waived after say 6 months following diagnosis.
Similar to Life Assurance, this is designed to pay out in the event of the death of yourself and/or your partner during the period (term) you specify at the outset.
Whereas Life Assurance pays out a lump sum, Family Income Benefit pays out a regular tax-free amount, although there is an option to convert the regular income into a lump sum.
There can be an option to have benefit paid on diagnosis of specified critical illnesses, during the specified term.
There is no surrender value or investment element and no benefit is paid if the chosen term is survived.
Premiums are usually fixed throughout the term
The purpose of this insurance is to compensate for the loss of income if an accident or illness prevents you or your partner or spouse from continuing to work as before. If you are able to work say part-time, or at a less well-paid job, then you would normally be paid pro-rata to the extent of your financial loss.
Payment normally continues until retirement, death or you return to work.
Typically you cannot receive more than 60% to 70% of your normal income.
Payment is not normally paid during a deferred period which can typically vary from 4 weeks to 1 or 2 years and can be tailored to coincide with the length of time your employer might continue to pay you.
The level of cover can be set to remain constant throughout the period insured, or to increase for example in line with inflation, in which case premiums will also normally increase each year.
The cost of premiums varies according to a number of factors, such as occupation, age, sex, amount of cover, current state of health and medical history. You can also arrange cover so that premiums are waived during any period you are making a claim against the policy.