What insurance do I need to get

Ciderarmy1987

Hi

We have recently had a mortgage application accepted and we are now thinking about what insurance we need need to take out.

We are both teachers and have 6 months months full pay 6 months half pay to cover us for sickness and accidents.

We are know that we definitely need building insurance but what else?

Cheers

ACG

- Building insurance is a must.
- Contents insurance optional
- Income Protection (Also known as PHI) is optional - 12 months cover is great, but the average claim is around 5-7 years. This pays upto 60% ish of your PRE tax income in the event of ill health.
- Critical Illness is optional - this pays a lump sum on the diagnosis of a critical illness (typically around 30-40 conditions are covered - heart attack, cancer etc).
- Unemployment cover is also optional... as a teacher though, im not sure you would have trouble getting a job?

HappyMJ

As long as you both work then taking out unemployment cover might not be needed as one income can look after the both of you. The person who does lose their job would get contributions based JSA for 6 months (£71 a week)...and would have plenty of pressure to get a job again. Having insurance money coming in might put someone (me) off taking any job as you could be worse off by doing so....being out of the job market for 6 months also does tend to make you less employable so just take anything that comes up and keep looking.

holly_hobby

Primarily, it would be prudent to effect Joint life cover(if neither of you want the survivor to have to continue to meet the mge on their own), and this should top the list of priority. To which a Decreasing Term Assurance (DTA) policy, is the most basic and cheapest form of cover, and sufficient for a repayment mortgage.

If you also have dependants, than obviously you will both want to make extra provision for their care following your passing/CI (alongside your Death In Svc benefits of course).

Then proceed to selecting income protection policies, as discussed above by ACG.

Hope this helps

Holly x

ACG

ooooo controversial....
I personally think Income Protection should be the priority for the majority of people (it may not be in this case, there isnt enough info). One income down, whats the first thing to go?... insurance and any luxuries, atleast with income protection in place you can still afford them.

You might not need both to cover everything, if affordability is an issue then you can reduce the cover down a little, but i certainly wouldnt put Income Protection in 3rd place... possibly second as you could argue that you would have no mortgage to pay therefore you £xxx a month better off, but deffo not third.


Also on a side note....

[As long as you both work then taking out unemployment cover might not be needed as one income can look after the both of you.

How do you know?
If mine or my gf's income stopped our lifestyle would go right down the pan. One of our incomes alone would result in a few cut backs, it would be possible but we would be misserable.

holly_hobby

Yep, different advisers will assess and advise differently.

In relation to a mge, blds ins is compulsory, but apart from that ...

For a mge debt for couples/family with dependants, sufficient life protection with combined CI should always be initially assessed/recommended (even if not accepted), followed as I said by income protection in 2nd place (not 3rd), which is reserved for pensions, with savings and investment recommendations bringing up the rear.

Of course for a single person with no dependants or no wish to leave the property to beneficaries, then income protection moves up the pecking order, as the loss of income through illness, would have a much more immediate and direct effect on them, than their loss of life.

Hope this helps

H x

Ciderarmy1987

ACG wrote: »

ooooo controversial....
I personally think Income Protection should be the priority for the majority of people (it may not be in this case, there isnt enough info). One income down, whats the first thing to go?... insurance and any luxuries, atleast with income protection in place you can still afford them.

You might not need both to cover everything, if affordability is an issue then you can reduce the cover down a little, but i certainly wouldnt put Income Protection in 3rd place... possibly second as you could argue that you would have no mortgage to pay therefore you £xxx a month better off, but deffo not third.


Also on a side note....

How do you know?
If mine or my gf's income stopped our lifestyle would go right down the pan. One of our incomes alone would result in a few cut backs, it would be possible but we would be misserable.

What extra info would you want to know and ill see what I can tell you.

Cheers

ACG

We work in a regulated environment, we would need to have a factfind completed in order to give advice. Its not worth the advisors careers to give specific advice on these forums. We can help by giving pointers and clearing up confusion but were not able to say "you should take this or that out" without knowing all the facts.

If your not 100%, it might be worth speaking to a mortgage or financial advisor. They wont charge a fee as the commission is usually enough.

I would put money on it being cheaper to speak to an advisor (not a bank sales person) and you will get a better level of advice as banks can only recommend their own products.

holly_hobby

What sickness payment does your employer provide for long term illness (in excess of 4 weeks), what portion of your salary is paid, and what period is it capped at ? (ie - when you would go off salaried pay and onto SSP).
Do you have any dependants ?
Details of your pension and DIS provison
Do you have any existing life cover (apart from DIS benefits) ?
Do you have CI protection ? esp important if you have a history of critical/disabilitating illness in your families (ie - cancer, heart disease, etc )

Having reviewed your existing provision, these kind of qs will give your adviser an idea of what recommendations are reqd (which you can choose to reject, but any protection exposure must be raised with you as part of best advice req's, even if advice is restricted to provision for a mge debt), with then a decision made on what you want to prioritise and review at a later time, if you have budgetary constraints.

Please book an hour with an IFA - whom having reviewed your current provision and exposure, can not only advise on basic mge protection policies, but also much more with regular on going periodic reviews as life ticks along and requirements change.

Hope this helps

Holly

Let_Us_See

If insurance was free everyone would without doubt be covered to the hilt. However, it isn't, and unless you have considerable spare income, it is more often a practical case of what can I afford over what I would like.

Realistically, we can break it down further into protecting your mortgage and protecting your income.

Mortgage wise, you have rightly stated building insurance is compulsory (always a condition of a mortgage), and for the cost involved, it would be silly not to include contents cover. I would also recommend joint life cover to repay mortgage on death of first person - it is cheap and simple - and any DIS is a bonus. Like most civil servants you have the benefit of six and six, and is there a need for simple Mortgage Payment Protection Insurance (MPPI)? Perhaps not, but if you wanted added security you could arrange it to kick in after 12 months of employer's benefit? Critical Illness Cover (CIC) should be considered, but is often declined purely on cost - anything left in budget! However, this could be revisited in a couple of years when financial conditions improve.

Income protection.................another can of worms, and another subject.

By all means see an adviser, but at the end of the day it comes down to the old chestnut of affordability!

Ciderarmy1987

We will get 3 x salary from work for DIS so we are looking covering our mortgage with life insurance and using the DIS as a bonus

We have pretty good cover from work so are thinking that we could avoid income protection.

We are unsure about critical illness as it is quite expensive. But thinking about maybe getting 40-50K of cover as this won't be a huge amount.
However we know that most life insurance policies come with Terminal illness cover that pays out if the have 12 months to live. What happens though if you are told you have 18months-2years left to live, do you have to wait until you only have 12 months left?

Also is it best to get single polices as the amount saved by getting a joint is relatively minor

Cheers for all your help