Monthly Archives July 2011

Why it’s Important to Get Life Insurance Advice

I am personally involved in helping people find life insurance. Mostly for people with a medical condition or high risk occupation.

Regardless of the different circumstances of the individual, the things that people protect are always the same and the top two priorities are family & mortgage.

Mortgages are quite simple to protect. If the mortgage is ‘Interest Only’ (the debt stays the same) then the most suitable cover is likely to be ‘level’ term insurance which also stays the same.

If a mortgage is ‘repayment’ which means it goes down over time then the FSA favours ‘decreasing’ cover which also goes down. It is cheaper than ‘level’ cover and serves the purpose, although quite a few people tend to favour ‘level’ cover even though the mortgage is going down.

Why? Well, as the mortgage goes down, the amount of cover stays the same so a surplus of cover builds up which could provide extra benefit for the family.

Plus, the policy holder always knows how much cover they have.

The FSA aren’t so keen on this though and there’s a good reason.

A house was worth a lot less 25 years ago which means the mortgage would have been a lot less so the amount of cover would not seem like quite as much in today’s terms thanks to inflation.

The best way to provide protection against inflation is with ‘Index Linked’ cover that goes up and so provides a comparable amount of cover, over time, throughout the term.

Usually the cover goes up and so do the payments.

So it might make sense to have one policy for the mortgage and another one for the family.

But then there’s Family Income Benefit, Waiver of Premium, Critical Illness.

Or how about Own Occupation or Work Tasks Disability Cover which could be the difference between a claim being successful or rejected….

This is just the tip of the protection iceberg and hopefully highlights the importance of really doing your research or getting advice from a specialist.

Another good reason for getting advice is based on a true story.

I recently spoke to someone who had applied for life insurance through a well known supermarket chain.

They have a mortgage of £120,000 with 18 years remaining.

An application was submitted over the phone for £115,000 of cover for 17 years.

Now I can only speculate as to how this happened and people do sometimes make mistakes but when I spoke to the applicant they couldn’t think of any reason why the ‘adviser’ had got it so wrong and they certainly seemed to know their mortgage balance and term.

Could it be the ‘adviser’ was really more of an ‘order processor’ and didn’t double check or even ask the right questions?

What’s hard to understand is an application had already been submitted with the wrong cover but there is a regulated process and the applicant should have seen or at least discussed a quote before it went that far which, would have brought the mistake to their attention.

This could be an isolated incident and I’d like to hope it is but I wouldn’t be surprised if lurking around the corner there’s an advertising slogan or an automated sales call that asks, ‘have you been mis-sold life insurance?’ or ‘Are you entitled to a refund?’

Equity release calculators – what are they and how do they work?

Equity release; a term met with instant distaste and fear, however this out-dated approach could may well be having an impact on how people view their financial options during their retirement years with many having little knowledge and understanding of how it truly works and what rules have now been put in place to regulate the industry.

Equity release could be a way to alleviate the stresses for many retirees who are struggling on low pension plans and reduced state benefits, coupled with the rising costs of day to day living.

If you’re wondering about equity release and a little unsure of where to begin, then a good start is to start at the beginning…naturally!

Simply put, an equity release plan is a way of releasing cash tied up in your home to spend as you wish. The cash released can be drawn down in stages or taken as a cash lump sum. There are typically no monthly repayments to make and you are able to stay in your home until you and your partner pass away or move into long term care.

Before the equity release industry was regulated, many people who had taken out an equity release plan ended up leaving their loved ones with debt as the loan plus interest accrued on the loan exceeded the value of the property. Nowadays there are equity release plans available which are SHIP approved (Safe Home Income Plans) and ensure a ‘no-negative’ equity guarantee, allow you to stay in your home for life and enable you to move home if you wish (subject to provider criteria).

There are currently three types of equity release schemes available on the UK market. Lifetime mortgages, drawdown lifetime mortgages and home reversion plans. All these plans have their own benefits and drawbacks, which you can gain further information on through the UK’s leading independent adviser, Key Retirement Solutions.

However, most of us want to skip that stuff and get to the nitty gritty facts and figures, which you can obtain from an equity release calculator. An equity release calculator works on the basis of your age and property value and calculates the maximum you could release through an equity release plan. An equity release calculator is completely free to use and can be found across many websites, however it is highly advised that you contact an equity release specialist after receiving your results so that you can find out more about the types of plans available to you.

At Key Retirement Solutions, they search the whole of the market to find you the very best plan. Their first consultation with one of their local advisers is completely free of charge and you have no obligation to commit to anything should you decide not to go ahead with a plan.