Mortgage Advice for Everyone Limited (MAFEL) can help you select the right life or income protection product to suit you and your family. This page details the types of protection available.
Designed to protect the most important people in our lives, Life Assurance is one of the most important aspects of financial planning. Without it, your plans for a secure future for your family can be ruined.
The most common reasons for taking out life protection is the ability to provide a lump sum or income to your family in the event of your death or to repay a specific debt such as a mortgage.
There are numerous different ways to protect your life and it is important to take advice from a professional as the differences in products and costs from various sources can be baffling.
A 'term' plan is designed to pay the benefit if the insured event occurs within a certain period of time (the term of the plan). Historically, the benefit has been the 'guaranteed sum assured' payable in the event of the death of the life or lives assured.
A level term plan is one where the sum assured remains the same throughout the term of the cover. The sum assured will only be paid should death occur during the term. At the end of the term the plan will cease. This plan is suitable where someone needs a fixed amount of money to pay a debt within the term.
Generally used to protect a capital & interest repayment mortgage.
A decreasing term plan is one where the sum assured reduces each year until, at the end of the plan, it decreases to zero. It is generally used in conjunction with a repayment mortgage (or similar loan) where the amount of debt is reducing, so the amount of life cover needed to protect it is also reducing. It is often set up to reduce in line with such a debt.
On death, rather than the sum assured becoming payable as a one-off lump sum, it is paid out in instalments, usually on a monthly basis. The instalments would be paid until the end of the original term of the plan. For example, if the plan was set up to run for 10 years and the life assured died after 4 years, the instalments would be paid for a further 6 years.
Frequently used for Inheritance Tax protection, Whole of Life plans are 'permanent', i.e. they pay out the benefit whenever the life assured dies, rather than within a specific term. Whole of Life plans pay the guaranteed sum assured whenever the life assured dies.
Critical Illness Cover is designed to pay out a lump sum on diagnosis of a specified illness. Sourcing the right policy is not based on price alone as the definition of illnesses covered and the features offered by each insurer can vary significantly.
With advances in medical science, many of the illnesses incurable ten or twenty years ago can now be treated. It is now quite normal for sufferers of heart attacks, cancer or strokes for example, to survive for several years. However, an individual's financial situation is often badly affected post critical illness as although an individual might return to work, it is very common to opt for a less stressful career or a job that requires working fewer hours.
As well as the need for income, there is invariably a separate need for a cash lump sum to bolster financial plans to:
We can advise and recommend on an appropriate level of cover to suit an individual’s circumstances. Our fully equipped brokerage service compares all available plans on the market from the whole of market to ensure the best possible plan is selected for a client's needs.
Your household income pays the bills, puts food on the table and allows you to live your life; your income gives you everything and yet it’s the least considered insurance when it comes to life protection planning.
Income Protection plans insure an individual's health rather than their life. Whereas critical illness plans pay a capital sum on the occurrence of certain specified medical conditions, income protection plans pay the income benefit following any illness or injury that is not specifically excluded.
There are a vast number of illnesses and injuries, which prevent people from working. Illnesses, which would not result in a claim on a critical illness or life assurance plan, (stress and bad backs for example) could result in a claim under the plan.
You would typically set the policy up to cover your working life to age 70 as the working age continues to increase from age 67 so that in the event of a claim you know that you will have enough money to replace the lost income whilst you recover.
The cost of this type of policy will depend on your current occupation, as some are more prone to claims than others, the term of the policy, personal medical history and also the deferred period chosen. The deferred period is the period of time you are off work before you can start to make a claim; this period can vary from weeks to months or even years. If you receive sick pay from an employer, then the policy deferred period can be dovetailed in to start paying out when the company sick pay stops being paid. Even as a self-employed person you can still have an income protection policy.
Accident, Sickness and Unemployment (ASU) insurance is designed to provide financial protection if you can’t work as a result of an accident, ill health or in the event that you become unemployed through no fault of your own.
This type of cover is also known as 'Mortgage Payment Protection Insurance' (MPPI) because the cover is generally designed to cover the cost of your mortgage in the event that you can’t work due to accident, sickness or unemployment.
Most policies only pay out for a maximum of 12 months and monthly payments are commonly capped at £1,500 or £2,000 or based on a percentage of your income.
This type of policy is only offered by a very limited number of providers & sometimes new policies are not available at all if the employment market is making employees redundant in certain employment sectors like finance, travel or hospitality.
Private Medical Insurance covers the cost of medical treatment outside the NHS. It gives an individual the opportunity to obtain specialist in-patient and out-patient treatment at a time and at a hospital of their choice.
An individual can provide plans for themselves on a single basis or choose to take a joint life plan and also include family members. PMI policies are often provided as group schemes, where the employer pays the contribution.
Costs are determined by age, sex, extent of cover (e.g. single or family) and location of hospital. No-claims discounts are often available. PMI is renewable annually which means if you have made excessive claims the insurer has the right to refuse cover in the future. The cost of cover goes up the older you are.
There is no tax relief on the contributions and benefits are paid tax-free. If provided by an employer, contributions paid are taxed as a P11D benefit for the employee and are treated as an expense of the business for the employer.