• The Basics
• Types of PPI
• Policy Details
  • Excess Periods
  • Payment Length
  • Employment
  • Sickness & Accidents
• Price & Protection
• Alternative Approaches
• Other Considerations

Mention PPI to a random person on the street and their mind will invariably turn to the scandal that was the mis-selling of policies to customers from the 1990s onwards and the claims for compensation that have exploded in recent years. Subsequently, the very idea of payment protection insurance has been tainted despite the fact that, in some circumstances, it can be a suitable form of cover to get. In this article, we’ll explore the ins and outs of PPI and explain why someone might buy it.

If you were looking for an article detailing ways to reclaim mis-sold PPI, here’s a link to our comprehensive guide.

The Basics Of PPI

The idea of buying this form of insurance is to cover any payments that you might have on outstanding credit. This could be your mortgage, a loan, a credit card, or something similar.

In other words, if you lose your source of income for any number of reasons, the insurance company will continue to pay off one or more of the credit arrangements you have in place, thus preventing you from falling behind and potentially getting into financial difficulty.

Just like any form of insurance, you pay a premium – in the case of PPI it is usually monthly – and you can make a claim if and when you need to (assuming the right conditions are met which we’ll go into shortly).

The Types Of Payment Protection Insurance

When you take out a PPI policy, you will have to choose between the three types available:

1. Unemployment cover will pay out should you lose your job through redundancy.
2. Accident and sickness cover will protect you when you are unable to work after an accident or because of a long term illness.
3. Accident, sickness and unemployment policies will provide cover under each of the above circumstances.

When you take on this form of insurance, you should think carefully about the type of protection you are most likely to require and what other cover you might have in place (see below for further details).

Looking At Policy Details

Just like any form of insurance, there is a significant amount of detail within a PPI policy that will directly impact how suitable it is for your circumstances. This section attempts to cover all of the most important points to look out for.

Excess/Deferred Periods

There will almost always be a period of time after you find yourself out of work before you are entitled to make a claim. The timeframe found most commonly on PPI documents is 30 days, although it is possible for this to be as much as 180 days.

Clearly you need to be comfortable with the excess period of any policy you buy, especially if it is longer than the standard 30 days. During this time, you will have to find a way to make the repayments on whatever credit you have covered.

Some policies do provide a process where your claim is backdated to the initial date of unemployment. So while you will not receive any money during the excess period, once you become eligible for payment, you will be paid for that entire time as part of your first instalment.

Generally speaking, a longer excess period will result in cheaper monthly premiums so think carefully about the length of time you might comfortably be able to continue making your credit repayments. If you have sufficient savings to cover 3 months worth of your mortgage, for example, then you can buy a policy that only starts paying out should unemployment continue past this point.

Length Of Payment

One thing to make absolutely clear is that PPI will only continue paying out for a fixed amount of time after a claim begins. This is usually around the 12 month period, but depending on your needs, you may be able to get a policy to cover you for anywhere between 6 and 24 months.

It goes without saying that if you find employment, you will stop receiving any further instalments. However, the exact timing of the last payout is something to look closely at – chances are that you will receive payments in 30 day blocks so if you enter work on day 25, for example, you may not be entitled to the money you would have otherwise received 5 days later.

This is worth thinking about if you can negotiate your new start date so that you don’t miss out on an instalment.

Type & Length Of Employment

Many PPI providers will have some stipulations about the type of employment that is required for their standard policies:

• you will typically have to hold a full time position with an average working week consisting of at least 16 hours
• these hours should ideally be for a single employer; if you work for multiple employers, you may not be able to get PPI
• if you work full time but on a contract basis then this may also make it harder to buy cover
• you should have been in employment consistently for at least 6 months, but more commonly 12 months is the minimum
• self employed people can get cover, but the instances where you are able to claim might be quite restricted
• it is highly unlikely that you’ll be eligible to make a claim if you were sacked from your job or if you leave without good reason
• taking voluntary redundancy is also unlikely to result in a successful claim
• if the redundancy is foreseeable (i.e. you know that your job is at risk before buying the policy), then you may not be eligible to make a claim

The Fine Print Regarding Sickness & Accidents

A PPI policy will not typically cover every type of illness or accident that may befall you. Here are some points to consider regarding this:

• pre-existing illnesses or conditions will almost certainly be excluded from any claims – these should be disclosed to the insurer before purchasing
• you may also be asked about yours and your family’s medical history which could impact the price you pay
• incidences involving alcohol, drugs or other substance abuse are not likely to be covered
• mental illness, including thing such as stress or anxiety, which prevent you from working are often excluded
• pregnancy related conditions may or may not be covered and you should check before buying
• some types of accident may not be covered by insurers – these may include those suffered during a high risk leisure activity such as skiing or mountain biking

Prices And Levels Of Protection

The amount you pay when buying payment protection insurance will vary depending on a number of factors, some of which have been mentioned above. Here are some of the other things that will impact the quotes you receive:

• the thing that will impact the price the most is the amount of cover you require – a £100/month loan repayment is going to be much cheaper than an £800/month mortgage for instance
• where you buy your policy matters a great deal – in general we recommend you avoid taking PPI out directly with the lender and, instead, look at buying a standalone policy from a separate company
• the length of time that payments continue for also plays a big role in the price you pay – cover for 12 months is going to cost you less than for 24 months even if you only claim for a shorter period than this
• how you pay also makes a difference – if you pay upfront in advance then it will work out cheaper than monthly instalments, but if you include the upfront cost in the loan itself then you’ll pay interest on it and it could end up costing more
• you should ensure you are fully aware of the rights of the insurer to increase your monthly premiums should they wish to – they can do this for a number of reasons that they see as adding risk to your circumstances

Consider The Alternatives

There are other ways that you might be able to get by in the case of you losing your job. In some instances, these may be more appropriate than PPI and should be considered carefully before any policy is taken out.

Income protection insurance – this also pays out when you lose your job, but it works in a number of different ways.

Firstly, it pays out a percentage of the salary you have lost rather than a specific amount to cover the repayments of a debt. Depending on this percentage, it may be more or less than what you’d receive from PPI, but typically it will be more.

Secondly, you can choose to spend the money you receive in any way you like whereas an instalment from a PPI claim must go on the repayments of the debt specified in the policy.

Thirdly, you continue to receive payment from income protection for as long as you are unable to work or as long as the term stated on the policy. Unlike PPI, which is normally restricted to 2 years at most, it is possible to buy income protection that pays out right up until retirement age.

Critical illness insurance – this form of cover pays out a lump sum at the point at which you are diagnosed with a long term condition or suffer something such as a heart attack that prevents you from working.

It is designed to help pay off mortgages, loans and any other debts you might have among other things.

It will not, however, cover unemployment caused by non-critical illnesses or accidents and it will not help if you are made redundant.

Savings – do you have sufficient savings (or other capital that could be easily turned into cash such as shares or bonds) to cover a period of unemployment? If so, ask yourself whether you really need to buy PPI to provide for this type of situation.

Employer benefits – does your employer offer out of work benefits for those staff members who suffer an illness or injury? Many companies, especially the larger ones, will continue to pay you some level of income even after your period of statutory sick pay ends.

Help from family members – while it’s not something many of us would enjoy asking for, it is worth finding out whether any of your family would agree to help out on the essential bills and credit repayments should you ever find yourself out of work.

Final Considerations When Buying PPI

This form of insurance doesn’t quite deserve the tarred reputation that it unfortunately holds thanks to the mis-selling scandal and, in the right circumstances, it can be a financial product worth considering.

When looking at quotes from different companies, always try to match the details as closely as possible to get a fair comparison. Don’t assume anything and ask questions at any stage where you feel unsure about something.

Always read the policy document thoroughly before committing and ensure that you are fully aware of the instances in which you won’t be covered; it is a legal obligation for insurers to make you fully aware of these when selling you a policy.

You have the right to cancel a new policy within the first 30 days and you should be refunded any premiums that you might have already paid (some costs may be deducted). You cannot be charged a specific fee for cancelling the policy. After this point, if you pay monthly premiums, you are usually able to cancel them at any time, although some insurers may specify a notice period in such a case.

There are a wide range of life insurance products available and before you can compare policies it’s important to understand which form of insurance will best suit your own particular circumstances.

In this article we’ll cover the following;

(click on a section to skip to it)

‘Term’ Policies

1. Level Term
2. Decreasing Term
3. Increasing Term
4. Family Income Benefit

Whole of Life Policies

1. With Profit
2. Guaranteed
3. Over 50s’ Plans

Buying Life Insurance

1. Setting Your Level of Cover
2. Joint and Single Policies
3. Critical Illness
4. Switching Policies
5. Brokers

Other Considerations

1. Writing In Trust
2. Waiver of Premiums
3. Disclosure of Medical Information

What Are The Different Types of Life Insurance?

Life insurance products can be broken down into two broad groups; policies that have a ‘term’ (a set period of time for which the policy applies) and those that apply for the whole of the holder’s life, with the first category being far and away the most popular.

First, here’s a look at the variety of different ‘term’ life insurance products out there;

Level Term Life Insurance

This is one of the most common and cost effective ways of protecting your loved ones against the financial difficulties that they might have to face should you die. Its simplicity lies in the fact that, as well as applying to a fixed term, the amount that the policy stands to payout is also fixed. Whether you’ve held the policy for a day or a decade, you’ll receive the full amount decided upon when you took it out. Likewise, your premiums will stay the same level for the duration of the term.

One of the main benefits with this kind of insurance is that it’s incredibly easy to budget for your cover, as you’ll know just how much you’ll have outgoing on a monthly basis for the entirety of the term. The only difficulty is deciding how big a lump sum you’ll need to cover yourself and whether this will translate into an affordable monthly premium. (We’ll discuss the things you need to consider when setting your level of cover further down the article.)

One drawback (if you can rightly call it a drawback) of such policies, is that if you survive the term you’ll receive no payout whatsoever. Moreover, your policy will have no cash in value at any time. On the bright side, at least you’ll still be alive!

Luckily, if you do require on going cover once your plan has come to an end, most policies have a guaranteed renewal clause, meaning you won’t suddenly find yourself without the protection you need. Often the premiums offered will be higher on renewing, which is understandable as, with the original term having elapsed, the insurer is much more likely to have to make a payout second time round.

Note that, in cases where your health has deteriorated considerably during the course of your policy, you may find you are unable to renew as an ‘uninsurability clause’ may come into effect. With this and all other policies, if you fail to keep up your payments for any reason you may lose your policy (with the possible exception of scenario where a waiver of premiums applies, more on which down the page.)

You may see this and other life insurance products referred to as ‘assurance’ rather than insurance. There is no difference in policies labelled one way or the other, it’s just some providers use one word and some use the other. Technically assurance applies when you are insuring against something that will definitely happen, such as death. However, as there’s no guarantee that you’ll die during the term, it’s still called insurance a lot of the time.

Decreasing Term or Mortgage Term Life Insurance

Whereas level term life insurance offers a fixed pay out no matter when in the term it is claimed, as the name suggests, with decreasing term life insurance (which is also sometimes referred to as mortgage term life insurance) the sum to be paid out goes down over time.

This is because the policy is designed specifically to cover the amount left outstanding on your mortgage should you die. As you continue to make repayments and your debt decreases, so to does the amount your policy stands to pay out.

Despite the fact that the pay off goes down overtime, the premiums you pay stay fixed throughout the term, just as with a level term policy. The difference is that, as you would expect given that your cover goes down over time, a decreasing term policy tends to be significantly cheaper than a level term policy offering equivalent cover.

(Note that to obtain this type of insurance you will need to be on a mortgage where you are not merely repaying the interest on the loan, but also the original capital.)

Increasing Term Life Insurance

In contrast to the product described above, with these policies the level of cover you have actually increases over time. In some cases it will be upped annually or at another regular interval as a way of ensuring that the effects of inflation do not diminish the value of your policy. In other cases you can arrange to have your level of cover increased should a certain event occur which marks a major change in your circumstances, for example if you get married or have a child.

With these policies you can expect that your premiums will also rise if your cover increases, however, these raises will only ever be a reflection of the increased value of the policy. Your premium rating (the insurers assessment of the level of risk you pose based on your health and other circumstances) will stay the same. So, as with a level term option, changes in your health during the term won’t result in bigger premiums.

Family Income Benefit

If you’d prefer your family to be provided with a regular stream of money rather than a single lump sum, you might want to consider using a family income benefit product.

Policies have a set term, 20 years being a typical example, during which you pay a fixed premium. If you die at any point during this term your family will receive a set level of regular tax free income for the rest of the term.

These policies are not usually renewable, so you can be left without cover at the end of your term. Furthermore, they have no cash in or ‘surrender value’ at any point. If you survive the term you’ll not be remunerated in any way.

Obviously, the cover provided by family income benefit isn’t as great as level term insurance and doesn’t allow for the same level of forward planning. However, as they are cheaper, they provide an affordable way to get a basic level of cover.

Whole of Life Assurance

With a whole of life insurance plan there is no ‘term’. The policy remains in place permanently until the holder dies. As with ‘term’ policies, there are various different types of whole of life policy, all of which have their own particular characteristics;

Balanced/ Unit-Linked/ With Profit

With these forms of insurance part of the premiums you pay go towards assuring the lump sum for your payout, whilst the rest go into a pool of funds which the insurer invests into various assets.

The lump sum paid out at the end of the policy will depend on how well these investments perform. The sum you will receive is guaranteed at a certain level, but the extra profits you receive on top of this are determined by how well the investments perform. The profits from the investments are added to your policy annually as ‘reversionary’ bonuses. Once added, your bonuses become part of the policy’s guaranteed sum.

These policies have what are know as ‘reviewable’ premiums, rather than ‘guaranteed’ premiums. They will start out at a fixed rate, normally for ten years or so, at which point they will be adjusted. According to how well the investments attached to the policy are doing, your premiums may have to go up to ensure that the guaranteed sum you originally wanted can in fact be delivered. Otherwise the assured sum may have to come down.

In recent years many people holding such policies have found their premiums being raised considerably and such policies have come under fire as many consumers have found themselves forced to shell out higher than expected rates simply to maintain the same level of cover.

This is a particular problem if unaffordable premium rises come when you are of a more advanced age and would find it hard to find alternative insurance. There is even an argument to suggest that such arrangements make it possible for insurers to charge what they like, as holders will have little choice put to pay up, or lose their cover. (Whole of life policies can usually be cashed in after the first two years, but it is likely that, if your premiums are being raised, cashing in your policy will entail a considerable loss.)

Always be careful to understand what parts of your policy are guaranteed and which are subject to change if you are considering a policy with an investment element. Furthermore, be sure to thoroughly research how well the insurance company’s policies have performed in the past to get an indication of whether they’re one of the providers that have been helping to give these products something of a bad name.

Guaranteed Whole of Life Insurance

Also know as not-profit whole of life insurance, this is a much more straightforward form of insurance. In essence it’s the same idea as level term insurance, in that both the payout and the premiums are set from the outset, only there is no term. The policy only comes to an end when it pays out on your death (assuming you continue to pay your premiums.) As you’d expect, these policies tend to be more expensive than level term options as the insurer knows for sure they’ll have to pay out eventually.

Specialist Over 50s Insurance

There are a number of insurers who provide plans aimed specifically at those over 50 who find themselves without insurance and, as a result of their age, are more likely to have health problems that might prevent them getting onto other plans.

Typically, these plans are open to anyone over the age of 50 who can afford them, with no medical barriers to acceptance. Premiums are fixed at a rate depending on how big a pay out you require. There is no term, but unlike some other whole of life policies, these plans cannot usually be cashed in.

Buying Life Insurance

When buying life insurance there’s a lot more to consider than just which type of cover is most suited to you. Here’s a look at the various other questions you’ll need to think through;

How Much Cover Do I Need?

Most people choose to set their cover at a level that will cover their family’s main ongoing expenses whilst maintaining a good standard of living. Outstanding debts are therefore of paramount concern and, in many cases, a mortgage will the biggest worry.

As a result, a lot of home owners choose to set their cover at a level that will allow them to pay off the remainder of their loan (with enough left over to cover other expenses), whilst choosing a term of equivalent length to their loan agreement. This way they know that if that do out live the term of their policy, the burden of their debt will already be gone.

Aside from simply covering debts, another rough guide you can use to get an idea of how much cover you may need is to multiply the annual salary of your family’s top earner by ten. This should provide enough to cover the care of children if, for example, one partner needs to temporarily give up work.

As well as setting an appropriate level of cover, with the exception of whole of life policies, you also need to think about exactly how long you’d need the cover for, as there’s no point taking out more protection than you need. For example, if your main aim is to be able to provide for your children should you die, the term need only extend to such a time as they’ll be able to cope for themselves. If it’s for a partner that you help support financially, it could just run until they’ll be able to claim their pension. Finally, don’t feel like you have to go for a nice round number. If you only need a 19 year term, take out a nineteen year term. There’s no need to round it up to 20.

Should I Get a Single or Joint Policy?

If you and your partner are weighing up your insurance options you will likely find that you can save a significant amount of money by going for a joint policy rather than insuring yourselves individually.

However, you need to bear in mind that a joint policy will give you a much lower level of cover. This is because the policy will only pay out for the first death. This means that should you or your partner pass away, the survivor will be left without any further cover.

It’s always worth comparing quotes for a joint policy against the combined cost of what you are able to obtain individually. In addition, remember that it could be possible to use a combination of individual policies to better reflect your financial situation. For instance, if there’s a large discrepancy in your incomes, you may find you get all the cover your family needs for a better price by placing the main earner on, for example, a guaranteed whole of life plan, whilst the other partner takes a cheaper option.

Do I Need Critical Illness Cover?

Critical illness policies are often offered alongside or as add ons to life insurance policies, however, you should think carefully before signing up to a policy. Though they sound as if they’re designed to give you financial protection should you be unable to work, they usually only cover a limited set of specific conditions.

You may well find that by having a life insurance policy in place with some form of income protection policy, you may not even need any more cover. If you are interested in taking out a serious illness policy you should make use of a specialist adviser who’ll be able to work with you to ensure you end up with the cover you need.

Should I Switch Policies?

If you already have life insurance, but feel you could have got a better deal elsewhere, you aren’t stuck. If you can secure a cheaper quote, you’re free to go ahead and take at a new policy before cancelling your old one.

It’s worth remembering that part of the beauty of a product such as level term insurance is that you’re premiums are set at a fixed rate for the whole of your term. This is attractive as, inevitably, we’re more at risk of dying as we get older. Therefore, if a considerable amount of time has passed since you took out your policy, you may find it harder to get a cheaper premium on a new plan.

Conversely, if you’ve made significant improvements to your lifestyle during the course of your policy may well find you stand to make some big savings by switching or getting a new quote. This is especially worth doing in cases where your risk of death is indisputably diminished. For example, you may have high premiums due to holding a position in a dangerous occupation, which you’ve since left for an office job. Similarly, making the switch from being a smoker to a non-smoker will make a major difference to how much you’re expected to pay. (Within the industry the standard for qualifying as a non-smoker is to have been completely free of cigarettes and tobacco for at least a year. Needless to say, you won’t be able to smoke again or you’ll invalidate your new policy.)

If planning a move, you also need to think about the fact that, unless you have a policy with a cash value (such as a with profits whole of life plan, for instance) you won’t be getting any return on the premiums you’ve already paid. It makes sense to factor this loss into your calculations when deciding if it’s worth moving to a new plan.

Should I Buy Through a Broker?

Using a broker can save you thousands of pounds, especially if they’re cheap. Indeed, brokers only exist in the first place because they have access to deals that insurers simply won’t offer to individuals. So, even you are able to hunt down the perfect policy on your own, there’s still a good chance you’ll be paying more by going direct.

However, whilst choosing to use a broker is relatively straightforward decision, picking which one to use is a little trickier. All brokers have different arrangements with insurers and different levels of access to different deals, so it’s important to shop around as much as possible to see who can offer what you want at the best price.

The advantage here is that since many life insurance products are very straightforward (for instance, with level term insurance you pick your level of cover, the length of your term and then either survive or claim) you can rest assured that you won’t be losing out by simply going for the cheapest policy that provides the cover you’re after. This makes the sometimes laborious process of shopping around a lot easier.

As many of these products are so simple, you can make further savings by going for an ‘execution only’ broker. When you take on a broker on this basis they will simply find the best deal for the cover you tell them you need, rather than furnishing you with advice. Of course, if you’re situation is a little complicated enlisting the help of a professional to help figure out an airtight insurance plan can be very prudent. Brokers will offer a ‘with advice’ service which, as the name suggests, will entail helping to establishing the best policy for you, as well as tracking down a great deal.

If you want to make sure that your life insurance plan makes sense alongside your other financial affairs you may be better off talking with an Independent Financial Advisor than a broker, as they’ll be able to take a wider view of things.

Other Considerations

Finally, here are a few other considerations you should think about before taking out a policy;

Writing In Trust

Your life insurance policy counts as part of your estate along with all of your other assets. As such, it’ll be subjected to inheritance tax which can take quite a toll on the amount your loved ones will end up receiving. One step you can take to avoid paying more inheritance tax than necessary is to place your policy in a trust.

When an asset is placed in a trust it is set aside and handled by a trustee until the beneficiaries are intended to receive it. By writing a life insurance policy in trust you can ensure that, when you die, the funds will be paid directly to those intended to receive them. It won’t go into your legal estate and will therefore not contribute towards the £325,000 threshold under which no tax is payable.

Another advantage of having your policy written in trust is that your named beneficiaries will receive their money quicker. This because probate (the process which establishes whether the executor of your estate has the right to deal with your possessions) does not to need to be granted for the trustee to pass the money on to people it’s intended of.

Having a policy written in trust is straightforward and will generally be offered to you as a free optional service by your insurer at the time you take the policy out.

Despite the many upsides to writing in trust, there are potential down sides. For instance, you will lose some of the flexibility you might otherwise have. Trusts are difficult to cancel once they’ve been put in place, so you need to think carefully before setting things in stone and be sure to seek out advice as to whether it’s the best thing for you.

Waiver of Premiums

In most cases, if, for whatever reason, you find yourself unable to pay your premiums, you will lose your plan. Needless to say, if you’ve spent a decade or more paying into a policy only to loose it, it could have disastrous implications for you and your family.

Going for a policy with a waiver of premiums provision can help you ensure that, should you be able to continue working due to an ailment of some kind, you’ll remain covered. Normally, such a provision can be added to a policy for a relatively low increase in premiums. If you think there’s a chance that illness will prevent you from being able to pursue your line of work, this could be something to consider.

Non Disclosure Can Result in Refusal to Pay Out

Obviously, (at least for most kinds of life insurance) the healthier you are the cheaper your premiums will be. This is because the insurers stand to benefit from your vitality. In the case of policies that have a set term, being in good health means there’s a better chance you’ll survive the length of your cover, and, in the case of a whole of life plan, living longer means you’ll contribute more towards the inevitable payout.

This does not mean that you’ll get better value by failing to speak up about any health issues that you might have. Aside from any specific exclusions that might apply to the policy, there will be a clause where it’s stated that the non-disclosure of relevant medical information will invalidate the policy.

This means that, following your death, if it comes to light that you held something back, there may be no pay out for your loved ones. Given that many insurers will check through your health records, it’s important to be thorough. This can apply to even seemingly innocuous things such allergies, so make every effort not to leave anything out.

Again, when dealing with brokers, you need to tell them of any relevant health problems you might have as, if they don’t know about your issues they may put you onto to a plan assuming that you’re in perfect health.

If you do have a range of medical issues, or if you don’t like the idea of having to disclose your medical issues, you could find that, even though they are expensive, it’s cheaper for you to with a plan that requires no medical information, such as the specialist over 50s’ cover discussed up the page.

As we all know, the premiums we pay are supposed to reflect the level of risk we pose to the insurance company. Knowing how they come to their conclusions on this subject and making sure you ‘play the game’ and match the criteria they are looking for will help you save. On top of this there are a number of other tricks you can use to keep your premiums down, some of which you may very well have never had cause to imagine. Here we take you through them all, form the obvious to the obscure.

Invest in Security

Being a safe bet in the eyes of an insurer isn’t simply a matter of driving safely. You car is at risk from damage at the hands of vandals or theft whenever you leave it parked up. Assuming your policy covers theft, you are going to pay less if you take measures to make life harder for criminals. Alarms, immobilisers, tracking devices and other such gadgets should put a dent in the price you pay.

Prangs can also happen when your car is parked in public. If you have a driveway or garage you are less likely to have to worry about some learner driver giving your car a bump on the curb side during a purely executed three point turn.

Reduce Your Mileage

This is a very simple tip, with an easy to follow logic behind it. The less time you spend on the road, the less likely it is that you’ll have an accident. If you’re looking to save, cutting out short journeys and walking instead could save you money on petrol, bring down your insurance costs and, with all that exercise, you might find you can cut out your gym membership! On top of all that, you’ll be helping out the environment too. It’s win-win-win-win!

Look at All the Policy Types

You may already know that there are three main types of policy; third party only, third party fire and theft, and comprehensive insurance. These offer differing levels of cover, with the most basic being third party only insurance (which only insures you for the damage you do to other people’s cars, passengers and pedestrians).

With this form of insurance you have to pay to repair any damage done to your own car yourself. You’d expect, therefore, that you’d pay much less, seeing as you’re getting less cover. Strangely this isn’t always the case.

Why? Because, companies believe that only a certain type of person would go for such a limited policy. They will expect this person to be young (younger drivers are perceived as more dangerous) to have a cheaper car and no no-claims bonus (if they did, they could go for a more comprehensive product.)

As a result, companies seem to assume that anyone going for the ‘cheap’ option is a risk. As risk means expense, it sometimes happens that lower levels of cover actually cost more. Never assume that going for less cover will automatically save you money. Going comprehensive can prevent insurers from incorrectly profiling you as a liability and see you rewarded with better value.

Spread the Risk

Many cars are shared by a few different drivers. If there are two or more named drivers on a policy then a quote should reflect the average risk posed. This means that, if you belong to a group that is seen as high risk, you may be able to bring down the cost by adding another driver with a great track record of safe driving.

You need to be wary of ‘fronting‘ however. This is where someone falsely claims to be the main driver so as to drop the price of a policy for a friend or family member. It’s not just a bad idea, it’s basically illegal. Obviously, attempting to defraud your insurers puts you in a risky position and simply won’t be worth it in the long run. As we’ll explain a few times over the course of this article, there are many instances where stretching the truth could make things cheaper for you, but it is highly inadvisable to lie and risk invalidating your insurance. It could cost you for years to come.

Leave Your Car as it Is

Modifying a car means it costs more. That automatically pushes up the price of insurance. That’s not so much a problem in of itself, after all, most people would prefer a more expensive car. Unfortunately, driving a modified car tells insurers things about you that, to be quite frank, they’d rather not here. Essentially, they are going to see you as a boy racer with a death wish and charge you accordingly. Of course, that might be a slight exaggeration, but only a slight one.

As with other tips in this guide, we need to stress here the importance of not attempting to withhold information from or otherwise deceive your insurance company. You’ll end up voiding your insurance altogether if you modify your car and decide to keep quiet about it.

Be Clever With Your Excess

We’ve talked about this elsewhere on our site, but it’s worth repeating. There is an odd paradox at the centre of most forms of insurance: We are rewarded for not claiming. Our premiums fall gradually as we go on paying them year after year without asking for anything in return. Given the savings to be had by not making use of the product, many people, if they are in a minor scrape, will simply pay up and have the prang fixed out of their own pocket rather than give the insurers an excuse to put up their prices. We’d rather pay less for something, even if it means never using it! In that case we’d be better off not having it (which we can’t as it’s illegal) or going for minimal protection (though again, as we pointed out before, that doesn’t always work.)

Avoiding reporting accidents makes sense up to a point, but obviously, there comes a level of expense where you simply have to bite the bullet and make a claim. Figuring out exactly where this line lies can help you save. If you can arrive at a number, this is the perfect amount to set your excess at. (The ‘excess’ is the amount that you have pay yourself before benefiting from a claim.)

The higher you put the excess, the lower your premiums will be (as it this reduces how much a company will have to pay out if you claim.) Setting the excess right at the upper threshold of what you’d happily pay to preserve your no claims bonus is the most efficient way to play it. But you also need to consider the question of bonus protection…

Insurance Insurance?

You can sometimes pay to ‘protect’ your no claims bonus. This means, for a one off fee (normally a fairly small one) you can keep your no claims bonus intact even if you need to make a claim. Though it seems weird to effectively pay for a discount, it can make sense from a consumer point of view and is worth thinking about.

It has to be remembered that, even though you’ll still earn a discount, companies can still put your premiums up after you’ve claimed. Basically, you’ll get a bigger discount, but it will be applied to a bigger premium.

Opting to protect your no claims bonus will require you to make an even more nuanced decision about your level of excess.

Pick the Right Job Title

When giving your information to an insurance company you have to give your job title. Obviously, there’s an infinite array of job titles out there, so you will normally have to pick from a fairly exhaustive list. Insurer’s have spent years compiling data to help them decide how professions correlate with a person’s risk level. If you belong to a professional class whose drivers are awful, you could be tarred with the same brush, if your counterparts are all angels on the road, you’ll stand to benefit.

There are some weird oddities that come up with this practice however, and, if you are cunning (or lucky) you could save a lot of money. For instance, if you are a bricklayer, there are a few other things you might also decide seem a reasonably applicable title for you if you were picking from a drop down menu, a construction worker, for instance. However, if you went with that second option you’d end up paying more.

The difference can be in the hundreds of pounds, so it’s well worth playing with quotes to see what comes back with regards to the different titles that could apply to your job. Again, it needs to be repeated that lying to insurers will invalidate your insurance and could see you labelled as a fraudster for years to come.

The biggest ‘job title’ to avoid is ‘unemployed’. This can send prices soaring. If you don’t have a job there may be much cheaper titles that accurately describe you, such as ‘retired’ or ‘housekeeper’ for example.

Keeping Your License Clean

Getting points on your license gives insurance company a clear indication that you are prone to lapses of concentration behind the wheel. It should go without saying that you should drive safely, but bear in mind that indiscretions on the road, as well as being dangerous, will hurt your wallet.

It’s also useful to know that not all points are equal in the eyes of insurers. For instance, being hit with three points for speeding will normally bump your quote up by 10% whereas being caught using a mobile phone whilst driving (without an appropriate hands free kit) will see your bills doubling in size. Multiple offences will multiply your outgoings further, adding a further sting in the tail to the fees you’ll be expected to pay.

Fortunately, there is sometimes a way out for drivers caught speeding in the form of a speed awareness course. Drivers who are stopped doing a speed which is only 10% over the speed limit plus 9mph can be offered a fine and a speed awareness course in the place of points. Obviously, this is only applicable if you are only breaking the speed limit by a relatively small amount, and, even if you are within the parameters just mentioned, it’s still at the discretion of the prosecuting force to decide whether you will be offered a place on a course of just given the points. (It also depends on where you live, as courses are only offered in certain parts of the country.)

If you can take a course instead of points, not only should it give you the skills to avoid breaking the rules again, it will also save you money.

If you do get points don’t worry they aren’t permanent. Most three point offences, such as speeding, they will only stay on your license for four years. If you get points, you do need to tell your insurer, otherwise you could invalidate your contract, which could leave you at risk of having to face big expenses on your own.

If you end up with a disqualification you will find it more difficult to obtain insurance once the ban is over, and you will be expected to pay more.

Dodge Appalling APRs

When you pay your premiums piecemeal you aren’t really paying in instalments. It’s more realistic to think of it in the following way: You can’t pay the whole amount at once so the insurer loans you the money and you pay back the loan.

The problem with this is that this ‘loan’ will usually have a sky high APR in the region of 20%, though some work out closer to 30%. That’s as bad as the price hike you could expect to see if you got 6 points for speeding!

You are better off finding another way to get credit and paying for your insurance in one lump sum. The cheapest option will be to put it on a credit card with 0% APR (you could do some stoozing whilst you’re at it), but depending on your other options and the length of time it’ll take you to pay off, it could even be cheaper to take out a loan with your bank than pay your insurer in instalments.

Be a Man

Okay, so this won’t be of much help to half the population, but it could work out well for those to whom it applies. Since December of 2012 it has been illegal for insurers to discriminate on the basis of gender. This is good news if you’re a man (or particularly enthusiastic about equal rights). Traditionally women paid significantly less based on statistical evidence that they were better drivers. Now that lower premiums cannot be offered on this basis they will, in the main, be higher for women and lower for men.

If you’re still on a policy that was priced before these laws were passed, have a look at switching. In most cases, if you have not claimed on a policy, you can get a new quote and receive a pro rata refund. If you find it would be better just to move to a new insurer, remember to account for any exit fees that might apply. Also remember that you’ll be losing your no-claims bonus by switching and factor this into your sums. The same applies if you’re up for renewal in which case you should also be sure to…

Never Automatically Renew

It might be more convenient in terms of the effort you need to put in, but you’ll pay dearly for your laziness. Insurer’s often put up prices dramatically year on year, making huge profits simply because they know people are too busy to look about. Snap out of your inertia and you can save hundreds.

If you really are too lazy or too pushed for time to find a better quote (which will almost certainly be an easy thing to do) at least call up your insurer and haggle with them. The truth is they know punishing people for being loyal is ridiculous. Tell them you won’t stand for it and they might be prepared to demonstrate some flexibility.

Minimise Risk

All insurance pricing is based on the perception of risk. Unfortunately, young drivers are seen as a high risk group. Whilst you may drive with all due diligence, unfortunately, many of your peers will wind up in traffic accidents as a result of their inexperience.

To avoid being lumped in with this high risk pool, you should demonstrate to insurers that you are far less likely to actually require their services. One way of showing your high level of competence behind the wheel is to take the Pass Plus course. This is an optional course which builds on the skills you learn in the process of gaining your driver’s license, and is a widely accepted among insurers as cause for a discounted rate.

Of course, no matter how well you drive, whenever you’re on the road there’s a chance you’ll have the misfortune to cross paths with a driver much less careful than yourself. As a result, one of the best ways to bring down your premiums is to spend less time on the road. Put simply, the less you drive, the less you pay.

It also needs to be remembered that your vehicle isn’t the only thing at risk when you’re out driving. The possibility of theft or damage from vandalism will also drive up the price of your insurance. As a result, where you keep your vehicle, assuming it’s a safe place, can help you save. For instance, if your car is kept in a garage or driveway you can expect to pay 3%-7% less than if it’s out on the street. Having a security device fitted can also drive down your bills.

Finally, consider the fact that the vehicle itself will, in the eyes of the insurer at least, reflect on you. If you’re driving a suped-up Vauxhall Nova that screams ‘boy racer’ or an SUV with a huge engine, you’re going to have to pay more than if you’re driving a modest second hand motor.

Think About the Excess

One of the paradoxes of car insurance is that, despite the large sums people pay for the privilege of their coverage, when they do have a scrape, a lot of the time their priority is to try and maintain their no-claims bonus and keep their future premiums down. As a result, it’s not unusual for folks to fork over fairly hefty sums for repairs out of their own pocket, leaving their insurers none the wiser as to the mishap.

On the one hand, having to pay for insurance but being scared to actually use it is an annoying state of affairs, however, if you know that you’re unlikely to claim unless you have no other way of staying on the road, you have less to fear from having a high excess (the portion you have to pay when making a claim). This is to your advantage in that, the higher you set your excess, the lower your premiums will be.

Make Use of New Legislation

If you’re a man and you’ve already got a policy, you could be paying too much. A recent EU ruling now makes it illegal for insurers to discriminate according to sex. (In the past men were seen as being more reckless and were therefore expected to pay substantially more.) Get a quote elsewhere and see what you could save. As long as you haven’t claimed on your current policy you should get a pro-rata refund when cancelling, though you might have to pay an exit fee.

Consider a Specialist Policy

To tackle the problem of unaffordable premiums, some insurers have come up with innovative new pricing structures. With a pay as you drive policy, for example, a monitor is placed in your car which records how far you drive and at what times of day (accidents more frequently occur during rush hour). Just as with a PAYG phone, you’ll be only charged for the time you actually spend driving.

There are also insurance policies that use monitors to analyse how well you drive. They’ll record your speed, how well you anticipate traffic and other factors. Whenever you hit the road you’ll be scored on how well you drove and your premium will track these scores. Of course, this can just as easily be a minus as a plus point, as it means even if you never have an accident, if the software deems that your driving isn’t up to scratch, you’ll have to pay more. Indeed, if you drive in a manner judged to be extremely dangerous your policy can be cancelled. As it’s illegal to drive without insurance this effectively means you’ll be taken of the road until you obtain a new policy.

Finally, remember to check out insurers who have specific policies for students and young drivers.

Multi-car Policies

There are now a number of insurers who offer multi-car policies to those living at the same address. So if you are still living with your parents, see if they would be willing to insure all the cars together under one policy – this can substantially reduce the bill compared to insuring each car separately and their no-claims discounts are still protected even if you have an accident.

The whole area does generate concerns though and here is some further information by way of answers to some frequently asked questions.

What circumstances does income protection cover?

Typically, those arising from situations where you are unable to earn income due to an accident or sickness.

In some cases it might be possible to include unemployment cover for things such as compulsory redundancy, however, that is typically only available for a maximum period of up to 12-24 months’ claims, depending on your provider.

How long can I claim an income for if an accident or sickness prevents me from working?

That depends very much upon your policy.

It might be possible to take out cover that will pay out for a maximum of a specified number of years or in other circumstances, right up until you reach your normal retirement date.

What sort of pay out does this involve following a successful claim?

As the name suggests, income protection cover will, following a successful claim, pay you a monthly income for a maximum period of time as specified by the policy you selected.

You are free to do whatever you wish with that income.

This differs from some forms of critical illness insurance, where a lump sum is payable upon the diagnosis of one of a specified range of conditions.

How much each month will I be able to receive by way of income?

Once again, that will rather depend upon the sort of cover you have selected and paid for to begin with.

As a general rule, providers of this type of cover may specify a maximum monthly sum that is a percentage of your previous earnings. That percentage might vary, but it could be anywhere between 45 and 65%.

Will I need a medical?

Possibly, depending upon your declared medical history.

If you notify your insurance provider, as you must if appropriate, that you have previously suffered from a serious medical condition they may take it under cover but might require their own independent medical advice before deciding whether or not to do so.

Generally speaking, insurance providers are realistic and they do not expect people taking out this type of policy to be superhumanly fit with an entirely illness-free history. It is a question of them attempting to identify and quantify, the risks associated with any illness you declare.

What would I need to do to make a successful claim?

The exact procedure will be highlighted within your documentation or explained in detail by your policy provider.

Typically, if your claim relates to a medical condition following an accident or illness then you will be expected to produce some supporting documentation from a medically qualified person. In some circumstances, the insurer may require you to undergo an independent examination.

Note that if you have own occupation cover, your policy may typically pay out if you are unable to continue with your existing work. By contrast, if your policy offers suitable occupation cover, your insurance provider may require you to accept alternative employment in another position – even if that was not commensurate with your old job.

We all know that being a homeowner comes with a lot of responsibilities, from making your mortgage payments, to keeping your property in good repair. However, sometimes when buying a home it’s possible that you might be taking on responsibility for more than you bargained for…

By taking over the deeds to a property you can become legally liable for a number of things, from illegal extensions carried out by previous owners, to paying for repairs to a nearby church!

Building indemnity insurance is designed to offer protection against any costs that you might incur owing to any form of liability (generally a liability that you were unaware of at the time of purchase) that would fall on you as the owner of a property.

Obtaining a Policy

Normally, insurance is taken out during the process of a sale as, if either party is concerned about liabilities attached to the property, having a policy put in place can help the transaction to go through. As you’d expect, it is normally the sellers that are expected to pay for the policy, however, there are some mortgage lenders who require that this type of insurance be in place before they’ll allow you to borrow. If you’re buying and you need a mortgage, should the seller refuse to pay for the insurance, you may find yourself forced to fork out for it yourself.

As there are various liabilities you can face as a property owner, some of which are dependent on fairly convoluted laws and regulations, it can be hard to know just how at risk you are of being hit with an unwanted expense. In general, where there is any doubt, your solicitor will advise you take out a policy and, as mentioned above, some lenders will insist on it.

Indemnity policies need to be purchased through a third party such as a solicitor or conveyancer as the companies that underwrite such policies do not deal with the general public owing to the expertise required to fully understand the ins and outs of these products. As the legal issues connected to the liabilities you might want to insure against can be fairly complex, you should make sure the professional representing you makes the important details of the policy as clear as possible.

Costs

Unlike other forms of insurance, the cost of indemnity insurance for home owners isn’t calculated according to the level of risk involved (which is usually minimal and, as mentioned previously, sometimes hard to ascertain). Instead, it’s linked to the value of the property in question.

Due to the low risks involved, the premiums you’ll be expected to pay are usually fairly low. You can expect to pay between £50-£500 depending on price of the house and what it is you’re insuring against. Once the insurance has been purchased the property is covered permanently for whoever is living there.

Types of Cover

Depending on the type of property in question there are a wide range of liabilities that might be loaded on to you as the owner. Here’s a look at some of the different eventualities that are commonly insured against;

No Planning Permission/Buildings Regulations

This is one of the most popular forms of indemnity insurance for home owners. It’s used to protect the policy holder from costs and complications that might arise should it come to light that pervious building work done on the property did not have appropriate planning permission from the council, or failed to follow building regulations. This is a risk as, even though you weren’t responsible for the work, the council can still take action against you as the owner of the property.

In some cases, if the council do take action, the remedy will be as simple as applying for planning permission retrospectively. However, you could be forced to remove an offending structure at your own expense, or you may be barred from using the property for a certain purpose. If you fail to carry out work ordered by the council via an enforcement notice you will not only have to pay for the changes (assuming you aren’t insured) you could also be hit with a £25,000 fine. Failure to pay this fine can result in imprisonment.

Whilst this may sound intimidating, bear in mind that it in reality, it’s a fairly rare occurrence that such actions are taken. On top of this, for a single dwelling house, there is a four year time limit after which the council cannot take action (it’s ten years for other types of property.) Nevertheless, if you are worried about a lack of planning permission/building regulations for work carried out on a property, indemnity insurance can provide peace of mind in that, as well as covering the cost of any alterations that have to be made, it will also payout so as to compensate you if the property’s value is lowered as a result.

These policies can be invalidated if incorrect statements about when the work in question was completed are given to the insurer. Likewise, you cannot normally get indemnity insurance if there’s been contact with the council with regards to the building work in question during the three months previous to taking out the policy. If the policy holder brings the insured work to the attention of the council after obtaining a policy, it will also be invalidated. (As a result you can not use this form of insurance as a way of avoiding applying for planning permission if you are planning on carrying out a project yourself.)

Restrictive Covenants

If the documents on a house forbid certain alterations which previous owners have carried out regardless, you could be forced to rectify the situation. A restrictive covenants indemnity policy will cover you against liability for the costs of any ensuing legal expenses or additional work that may be ordered by a court should a broken covenant be discovered and enforced on you.

As well as protecting you from the costs you might face in honouring a covenant, your policy will also compensate should your property lose value as a result of changes that have to be made. You can also use such policies for protection if you are self-building on a plot of land which may be subject to covenants which were applied to it as part of a previous sale and could affect your project.

Normally cover will only apply if the covenant was breached at least 12 months before the policy was obtained and was done so without the knowledge of the holder. Disclosing the existence of such a policy to anyone other than mortgage lenders or buyers for your property can also invalidate your insurance.

Again, these policies are purchased through third parties. You should ensure they explain to you fully what covenants might apply or potentially be breached and how this would affect your life in the property. Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from your insurance may be adequate to you. For instance if you have to significantly change your dream home, you may feel you’d have been better of not buying in the first place.

Absence of Easement

This type of policy insures against the risk that a lack of access rights could affect the way you maintain and use your property. For example, there might be a water pipe running through a neighbouring field for which no easement can be provided.

Your policy will help you pay for legal expenses incurred in obtaining legal access or creating new access. You’ll also get compensation should the changes that have to be made reduce the value of the property.

Chancel Repair Liability

There’s an archaic law that can end up placing the responsibility for the up keep of a nearby church with the owner of a house. In about 5,000 parishes throughout the UK churches are able to demand money for repairs from the owners of properties built on ex-monastery land, who are, technically speaking, de facto lay rectors.

Though many churches are understandably shy about enforcing this law, which dates back to pre-reformation times, there have been notable casualties. In 2009 a Warwickshire couple were actually forced into selling their farm after it was judged that they were legally responsible for paying a bill for £230,000 worth of repairs to the local church.

It can be hard to find out if this applies to your home or one that you’re thinking of buying, and if it does it can be hard to assess how many people the responsibility is divided amongst. Either way, indemnity insurance can help you to negate this risk by covering you for any costs incurred if the law is enforced on you.

The Insolvency Act

If a property is gifted to a child by a parent who then proceeds to go bankrupt within the next seven years, the property reverts to their estate. If this is a concern for you, you can insure against the risk that you’ll have to pay to protect your interest in the property.

(Note this product is not aimed at those giving property as a gift, or those receiving it as a gift or undervalued, but owners or mortgage payers paying for its full value.)

It’s not something any of us want to think about, but a funeral costs a lot of money. Of course the type of funeral you choose for your loved one will have an effect on the cost, and there are ways to keep the price down even if only a little. There are things you can save on and things you can’t. Here we give you a breakdown of funeral costs to give you an idea of how much it’s going to cost.

Funeral directors’ fees

The funeral directors take care of a lot of what’s involved with a funeral, but it can help to have a rough idea of the cost of each part. In total, they will charge you somewhere between £1,500-£2,000 depending on the options you choose, and usually includes disbursements (see below). All funeral directors are different and some offer more services than others, but a typical funeral director will take care of the following:

• Arranging and conducting the funeral in accordance with your wishes. This includes booking the minister (or other celebrant if you’re non-religious), the organist if required, and the arrangement of suitable music to be played.
• Taking care of the paperwork involved.
• Liaison with authorities, such as doctors and the coroner, if necessary.
• Transfer of the deceased to the funeral home.
• Provision of the coffin. The cost of the coffin can vary widely, from a simple shroud at about £50, to a ‘green’ cardboard coffin at between £100-£200, to a standard pine coffin at about £300, to a luxury willow coffin at about £1,000. Some more elaborate coffins can reach up to about £2,000.
• Care and presentation of the deceased, including any hygienic treatment necessary.
• Provision of a hearse to take the deceased to the funeral.

It’s difficult given the limited amount of time you have to arrange a funeral, but try to shop around a few different funeral directors and find out which ones offer the best service for the lowest cost.

Disbursements

These are additional costs which are paid by the funeral director to third parties on your behalf, and include things like doctors’ fees, ministers’ fees and cremation or cemetery fees. The funeral director has no control over these fees, but they can range anywhere from about £600-£1,000.

Other expenses

The cost of a granite headstone starts at about £500 and goes up from there. A bronze wall plaque is around £150 and includes the lease to display it. This typically lasts for ten years after which time it will need to be renewed.

If you choose to have flowers, the funeral director can sometimes arrange this for you. If not, shop around local florists for prices – prices usually start under £50 and go up, depending on how elaborate an arrangement you require.

You might want to hire a car to take immediate family to the funeral; this can cost anywhere up to about £300. If you’re holding a wake, you might want to provide food, especially if you’ve got people coming a long way. This can set you back anywhere from £7-£10 a head, depending on where you choose to hold the wake.

If you want to put an obituary in the newspaper, it will cost you probably between £75-£100 depending on size and the number of words.

Help with the cost

You can apply to the government for a bereavement payment of £2,000 if your situation means that you qualify for it. Contact Jobcentre Plus for more details and an application form.

Planning For The Worst

If you are reading this and fearing that your family will struggle with these costs, you can always start planning now to give them the financial leeway they need. A prepaid funeral plan can be the most affordable way for you to leave your loved ones a lump sum with which they can pay the costs associated with bidding you farewell/

Many policies will offer a combined life and illness cover which will pay out either upon your death or upon the diagnosis of a severe illness, whichever comes first.

Why do I need Cover?

Figures released by the Munich Re Group in 2002 revealed that 1 in 3 men and 1 in 4 women between the ages of 40 and 70 will develop a critical illness including cancer, heart attacks, strokes, coronaries and MS. These figures don’t include those who suffer permanent disabilities after disease or accidents, so with such alarming figures it seems pertinent to think that everyone should consider getting critical illness cover.

The financial implications of any debilitating illness can be catastrophic. A lump sum could pay off at least some of your mortgage and you wouldn’t have to rely on the charity of friends and family. At such times of emotional distress the realisation of financial hardship can prove to be hard to bear and can even add to the stress and anxiety caused. Having a lump sum awarded in the case of sudden illness can provide a useful safety cushion.

What is Covered?

Individual policies differ with each provider but all policies cover the most common conditions of cancer, coronary bypass, heart attack, stroke, major organ failure and MS. A more comprehensive policy will also cover things such as the loss of a limb or one of your senses through accident or illness.

The Association of British Insurers introduced a set of guidelines in 2011 which have made policies more transparent and easier to understand which means that you should know exactly when your policy will pay out and what for. As with any insurance policy it’s always best to check the small print, especially in finding out about any restrictions and exclusions.

It is also worth mentioning that critical illness policies usually only settle a claim after a period of 28 days, known as the ‘survival period’.

What is Not Covered?

The most common exclusions are self inflicted injuries, HIV and AIDS related illnesses (unless as a result of assault, blood transfusion or accident at work), injuries suffered during criminal acts, illness as a result of ignoring medical advice and drug or alcohol abuse. In addition to these, most policies will also refuse claims which are the results of hazardous sports or hobbies – this also includes skiing so if you are a regular skier you might want to check your policy.

Insurers will also refuse to honour a claim if any information you gave during the application process was proven to be false or if you withheld important information.

What Do I Need to Declare?

Once you have chosen your provider you will be sent a proposal form to complete. This will ask you to list inherited and genetic conditions for your family and you may be asked to attend a medical. It’s vital that you are completely honest because should you ever need to make a claim, you can be sure that your provider will run through your medical history with a fine toothcomb. Don’t withhold information in order to bring down your premiums as it would be a complete waste of your payments if your claim was refused due to inaccuracies during your initial application.

How to Choose an Insurance Provider

• Look out for what policies cover and what they don’t as cheaper premiums might involve more exceptions and restrictions.
• Fixed premiums may be initially more expensive than variable premiums but could prove to be cheaper in the long run.
• Don’t be afraid to ask providers for their best deals and compare quotes, but do bear in mind that your final quote may be dependent on your medical history.
• An insurance broker such as www.critical-illness-cover.org may be able to find you the best deal on the market for a commission from the provider you choose. Whilst not as cheap as a discount broker, an independent insurance broker will have the experience and expertise to be able to offer sound & impartial advice, which could prove to be extremely valuable with a complicated insurance product such as this.
• Alternatively you could use a discount broker to secure you a good deal. They can offer cheaper monthly premiums by repaying any commission back to you in return for a one-off fixed fee but they do not offer advice. With products such as critical illness cover it is always recommended that you seek independent advice to ensure you choose a suitable policy which is likely to pay out should you submit a claim.

Finally, if you want to cut your risks and drastically reduce your premiums, then stop smoking, eat healthily and take plenty of exercise!

resources: For the official UK guidelines concerning which illnesses must be covered by a critical illness insurance policy please visit the ABI Website.

Related Articles

• The Importance of Life Insurance in Financial Planning
• The Best Years Of Your Life

With an estimated 30 million adults in the UK having no will in place*, it’s clear that thinking about death is not a palatable prospect.

It’s not just a lack of wills that can create problems when it comes to someone passing away, funeral costs can be a real issue too.

Many of the people without a valid will in place have also made no provision in terms of prepayment funeral plans.

With the cost of funerals rising every year, not having a prepaid plan in place could result in financial hardship for those left behind in years to come.

A funeral service can be a very individual occasion. For example, some people may want their coffin decked out in their favourite football strip, or have people singing a rock song at the service, while others may favour a more traditional approach.

Regardless of the kind of funeral you have in mind, a prepaid funeral plan can help you make it a reality.

One of the major benefits of taking out a prepaid plan is that it makes you think about exactly how you’d like your funeral to be. Many of us go for years without ever giving this particular topic any thought at all.

Regardless of whether you want a traditional send-off or something completely bespoke, you prepaid funeral plan should be flexible enough to accommodate any requests.

Benefits Of Prepayment Funeral Plans

Listed below are some of the other main reasons it’s important to put a prepaid funeral plan in place now.

Peace of mind

Prepayment funeral plans can deliver peace of mind for you and your family. Regardless of what age you are, nobody knows for sure when they’re going to pass away.

Having a plan in place will ensure your wishes are documented. This will make it easier for family and friends to organise your funeral service, and be sure that’s what you would have wanted.

Without a will or pre paid funeral plan in place, you could be leaving behind difficult situations for others, at a time when they’re already trying to cope with your loss.

Financial impact

When a close family member has died, the last thing you want to think about is how you’re going to pay for their funeral.

Unfortunately, this scenario happens to thousands of people in the UK every year, where their parents, grandparents etc haven’t made any financial provision for their send-off.

Nobody likes to think about their death, but it doesn’t take long to set up prepayment funeral plans, and once it’s done, you can rest easy knowing your loved ones won’t have any financial problems as a result of having to pay for your funeral.

Rising funeral costs

As well as any potential financial impact on those left behind, rising funeral costs also make a prepayment funeral plan the sensible option. Many elements of funeral services have risen beyond inflation in the last 10 years, so it makes sense to safeguard your funeral at today’s prices, rather than wait for many years and end up paying a lot more.

The Flexibility Of Prepaid Funeral Plans

Getting a plan for your funeral does not mean everything is set in stone; you can remain flexible if you so wish and change certain things as time passes.

Paying for your plan

Prepaid funeral plans are also open to most age groups, so whether you’ve left it later in life to think about your funeral service, or have decided just to put a plan in place at a younger age for your own peace of mind, you should be able to find payment options to suit you.

Many older people decide to make their prepaid funeral payment in full, although there are also options with some providers to pay a fixed monthly amount for a set period of time (usually 1 to 3 years), or if you’re between 50 and 80, you may be able to pay a smaller monthly sum over an indefinite period.

Making changes

Just as you may want to make changes to your will as you get older and your circumstances change, you may also want to amend your funeral plans.

For example, if you take out a plan when you’re young and then get married, there may be a special song you want played from your wedding day rather than whatever you’d originally chosen.

If you’re making significant changes to your plans, you should expect that there may be additional funeral costs to pay. For example, if you had originally chosen a plain cardboard coffin, then decide you want it decorated with a favourite photo, this is going to incur an extra cost which will be passed on to you.

Location

If you choose a national funeral provider for your prepaid plan, you may also have some flexibility when it comes to the location of your funeral. For example, if you lived in Scotland when you took out your policy but have since move to London with your family, it may be possible to have your prepaid funeral plans transferred to your new location.

*source: http://www.guardian.co.uk/money/2010/oct/23/making-will-dying-intestate

Do I Need Mobile Phone Insurance?

Whilst insurance policies are, in theory, designed to save you money should misfortune befall you, they often turn out to be a false economy.

Phone insurance differs greatly from other kinds of insurance in that price you’ll pay is based entirely on the value of the cover you’re looking for. Unlike with car insurance, for example, other factors such as the demographic you belong to, are not factored in and even your history of passed claims is unlikely to be taken into account.

This means that, whilst you might benefit from lower car insurance premiums for having a track record as a safe driver, you will not be rewarded for being careful with your phone (aside from perhaps a nominal no claims bonus, such as a free battery after two years.) On the other hand if you are a serial loser of phones you won’t be punished with extra charges.

Therefore, if you are sure that you are too careful to need insurance you may wish to avoid effectively subsidising the carelessness of others.

If you are on a pay-as-you-go tariff then, even if your phone is stolen, the thief can only make use of the limited credit you already paid for, so unless you have a particularly expensive handset or feel you are very likely to have a mishap, getting insurance may be a bit much.

Instead you could ‘self insure’, by setting a little money aside each month, roughly equivalent to a premium, just in case of emergencies.

There are other situations in which you may not need insurance. For example, with certain premium bank accounts phone insurance comes free.

If you already have contents insurance your may phone may also be covered, even outside the home. It may be cheaper to add to your contents policy than to get separate insurance for your phone.

However, if you are accident prone, have an expensive handset or are on a contract phone insurance might be ideal. This is because if you have contract you will have to continue paying the monthly fee, even if you lose the phone or it is stolen. What is more you may have to pay for the thief’s phone calls.

Different Types of Cover

There are a number of different cover areas a policy might contain. Your average policy might contain two or three. “Full Cover” policies tend to cover 6 or 8. These are as follows;

Accidental damage: As long as the cause of damage is not neglect, the cost of repair or repayment will be paid. You can also get fire and water cover specifically to cover costs caused by those sources.

Loss: Cost of replacement will be covered, although this sometimes does not apply if the phone was lost in area with easy public access. The cost of accessories and applications and data stored on the phone are not usually covered.

• Theft: Replacement costs will be met. Be aware that definitions of theft vary between providers. For example many insurers do not cover ‘unattended theft,’ where your phone is taken by someone if you leave it lying around.
• Malicious Damage: The cost of your phone will be covered, unless the damage was done by you.
• Mechanical Failures: Covers the cost of the phone breaking outside it’s warranty.
• Fraudulent Calls: Covers the cost of fraudulent calls. Often the cover only kicks in from the time you report the phone as being missing.
• Overseas: Means your policy is effective abroad as well as at home.
• These policy areas will all have different financial limits on them and also different excesses (an extra cost you have to pay in order to claim.)

Getting Insurance

You will normally be offered insurance when you by a phone or take out a contract, as part of a deal or as an added extra. If you have seen a better deal elsewhere remember that you don’t have to take insurance from you contract provider. However, you could use the offer from elsewhere to bargain with your preferred supplier, as their offers are normally negotiable.

If you need a “full cover” policy you’re better off going with a third party, such as a dedicated phone insurance company. They are specialists and can offer more competitive prices.

It is best to shop around. The easiest way to this is to compare prices online and match your required cover to the best quotes on the market. These will vary according to the cover you need, the age of your phone and its value.

Any provider of insurance should be regulated by the FSA so beware of scam companies who aren’t on their register and don’t be persuaded to rush into buying insurance if you receive cold calls or are subject to a pushy salesperson.

Things to Look Out For

Some network work providers, not being insurance specialists, charge similar amounts for insurance regardless of the value of the phone, which can make it a bad deal. They can also be harder to deal with when making a claim fail to measure up in other ways.

Check out the following things;

• Do they have a data back up system?
• Do they have guaranteed replacement times?
• Do they have any admin fees?

Things You May Need to Make a Claim

If your phone is lost or stolen be sure to inform your insurance company as soon as possible, as the speed of response may effect your claim. If your phone is stolen you will need to report it to the police and get an incident number from them in order to process your claim.

To claim you normally need the following things; the phone’s make, model and IMEI (International Mobile Equipment Identity) number, the phone number and proof of purchase, such as a receipt or dispatch order.

You will also need your insurance documentation so be sure to file it in a safe place.