Why do you need insurance?
The loss of a spouse or parent can leave dependants with additional issues to cope with other than the emotional. If you are inadequately insured, your dependants may be left with a dramatically reduced household income, which could affect their quality of life. Potentially there may be reduced opportunities for children such as the inability to pay for a university education, or you may have difficulties in maintaining mortgage payments on a reduced income. In the event of your death, a lender will not write off your debt. Rather, they will continue to pursue the debt through your dependants and could, ultimately, foreclose on the loan meaning the loss of the family home.
A policy which pays out a lump sum or an income when the person insured dies. It only pays out if you die within the term you’ve agreed. If you live longer than the term, you get nothing. As a couple, you can also take out term cover in both your names, with the policy paying out on the first death only during the term. An alternative approach is to have 2 individual policies providing twice the protection, often for very little extra cost. You can choose between Level or Decreasing cover as specific protection for mortgages, depending on whether you have an Interest Only or Repayment mortgage.
Critical Illness cover is an important financial safety net. It’s designed to pay out a fixed cash amount if you’re diagnosed with a defined critical illness under the policy during the term of the policy. It covers a list of specified life-threatening or debilitating (but not necessarily fatal) conditions such as heart attack, stroke, certain types/stages of cancer, multiple sclerosis and loss of limbs. The illnesses covered will be specified in the policy along with any exclusions and limitations – these differ between insurers. Critical illness policies usually only pay out once, so are not a replacement for income. You can use the payout to pay for medical treatment, pay off your mortgage or anything else.
There are various plans designed to protect your income in the event of illness, accident or unemployment. These can provide a replacement income for 12 or 24 months, or for longer periods such as the full mortgage term or to your retirement age. There are generally ‘deferred periods’ being a length of time before any benefits would start to be paid out and the cost of the plan can be greatly reduced if you are able to wait longer. These plans are designed to enable you to continue paying your mortgage and other household bills whilst off work, ensuring that you do not get into financial difficulties through an illness or injury.
To ensure that your mortgage, and more importantly your family are adequately protected contact Bee Mortgages to discuss your protection requirements.