Life Insurance
What is life insurance?
Life insurance is designed to reassure you that your dependants, such as your children or a partner, will be financially looked after in the event of your death. There are several things to think about when buying it, such as the type of policy you want, when you need it and how to buy it.
How does life insurance work?
Depending on the policy type you move forward with the insurance pays out either a lump sum or regular payments on your death, giving your dependents financial support after you’ve gone.
The amount of money paid out depends on the level of cover you buy.
You decide how it’s paid out and whether it will cover specific payments – such as mortgage or rent – or if it’s to leave your family with an inheritance.
Inheritance tax planning is not regulated by the Financial Conduct Authority
What types of life insurance are there?
There are two main types:
Term life insurance policies
These run for a fixed period of time, known as the ‘term’ of your policy, such as five, ten or 25 years. They only pay out if you die during the policy.
There are three kinds of term life policies.
Level – pays as a lump sum if you die within the agreed term. The level of cover stays the same throughout. This is the most simple and affordable option.
Decreasing – the level of cover reduces each year. It’s designed to be used with repayment mortgages, where the outstanding loan decreases over time.
Increasing – the level of cover rises over the term of the policy, to keep up with inflation.
Whole of life insurance policies
These pay out no matter when you die, as long as you keep up with your premium payments.
They’re often used to help towards a funeral or for Inheritance Tax planning.
However, they’re typically more expensive than shorter-term policies. There’s also a possibility that if you live longer than you expected, you could end up paying more in than you’ll get out.
Do I need life insurance?
It’s suitable for you if you have:
dependants, such as school-age children
a partner who relies on your income, or
a family living in a house with a mortgage that you pay – a life insurance policy can provide for them if you die.
You might also want a policy that covers your funeral expenses.
Check if you already have it through your work. Employee packages often include ‘death in service benefits’ that will provide an amount of cover that’s linked to your salary.
Depending on how much it’s worth, you might need an extra life insurance policy. Remember that if you stop working for that employer, you’ll no longer be covered under their policy.
You might also need to think about whether receiving a payout will affect any means-tested benefits your dependants might otherwise qualify for.
Home Insurance
Buildings and Contents Insurance
Buildings insurance
Building insurance covers your home in the event of damage caused completely beyond your control, for example storm or flood damage, a fire, smoke or explosions, water leakage/burst pipes, subsidence, or third party vandalism or damage etc. Mortgage lenders insist that you take out this cover, as it means they will be able to recover their losses in such events. It is like a type of security or collateral for the loan that they have given to you.
Contents insurance
Contents insurance will cover you in most of the same situations as buildings insurance, but also includes theft. Again, any of these perils must have been beyond your control. It covers items in your house which are not fixed to the property, for example your furniture, jewellery, appliances and clothing. Most of the available contents insurance policies will even cover things like the contents of your refrigerator and freezer! Indemnity insurance cover will replace exactly what was there before, so if you claim for a fridge freezer that was already three years old, you will be given a replacement fridge freezer that is three years old. The other type is labelled “new for old” cover and will give you a brand new replacement of whatever gets damaged or stolen, thus you would get a brand new fridge freezer.
Why do I need this type of insurance?
Most lenders/mortgage suppliers will want to ensure you have taken this cover in advance of completion Often this type of insurance is compulsory when you take out a mortgage. This insurance is highly recommended to protect you against unforeseen circumstances.
At RH Financial we are here to help you secure the correct cover to protect you and your family against unexpected life events
How insurance works
Insurance is a financial product sold by insurance companies to safeguard you and / or your property against the risk of loss, damage or theft For example by flooding, burglary and theft.
Some types of insurance you have to take out by law such as motor insurance if you drive a vehicle; some you may need as a condition of a contract such as building insurance as a requirement of your mortgage; and others are sensible to take out such as life insurance.
We understand correct protection of your property and its contents is extremely important, get in touch and we can look to advise you about your cover options for your existing home or new property
Home insurance is the bracket that Buildings and contents insurance is placed under. It is a combined insurance, the two can be taken separately, that will cover or replace any damage that might occur to the house or its contents, including loss and theft. This type of insurance is essential for all mortgaged houses.
