The Essential Guide To Insurance



Insurance can at​ times be somewhat of​ a​ minefield for many people; with so many different products available,​ choosing the​ right one and making sure that we are properly covered can be a​ challenge. Although this may be the​ case,​ it​ is​ also an​ essential part of​ our everyday living.

Buildings Insurance

Your home is​ likely to​ be your most valuable possession so it​ is​ important to​ ensure that adequate buildings insurance cover is​ set in​ place.

Buildings insurance covers the​ structure of​ the​ building plus anything you​ would normally leave behind when you​ move. This will include things like patios,​ drives,​ fences,​ walls and permanent fixtures like kitchens and bathrooms. Accidental damage caused by fire,​ storms,​ or​ burst pipes,​ for example will also be covered.

Having buildings insurance cover in​ place is​ not if​ fact a​ legal requirement although nearly every mortgage lender will insist that cover is​ taken out as​ they look to​ protect what is​ their asset too,​ albeit temporarily.

Many lenders will offer a​ block building insurance policy arrangement. the​ cover provided and premium rate are agreed between the​ lender and insurer,​ but instead of​ issuing each borrower with an​ individual policy number a​ master policy is​ set up,​ with both the​ lender and insurer having copies.

These premiums are not always the​ most competitive in​ price so it​ is​ advisable to​ shop around for quotes also.

The amount that each property will need to​ be insured for will of​ course vary. the​ valuer will provide a​ figure for the​ re-instatement value of​ the​ property,​ ie the​ cost of​ rebuilding in​ the​ event of​ total destruction. There is​ no specific link between this figure and that for the​ valuation for mortgage purposes,​ or​ the​ price that the​ purchaser has agreed to​ pay.

Contents Insurance

Contents insurance offers cover on​ the​ household goods and possessions inside your property and will often include the​ garden too if​ applicable. in​ other words,​ contents can be defined as​ everything that you​ would normally take with you​ when you​ move.

The lender will not insist that you​ take out a​ contents insurance policy however in​ many cases it​ is​ advisable. Not doing so could see you​ unable to​ replace your belongings in​ the​ event of​ disasters such as​ fire,​ flooding or​ burglary.

Many policies offer cover on​ a​ ‘new for old’ basis which means should anything happen to​ your possessions such as​ the​ TV or​ washing machine; you​ should be able to​ replace the​ damaged goods for a​ new model.

Mortgage Payment Protection Insurance (MPPI)

Mortgage Payment Protection insurance (MPPI) is​ also known as​ accident,​ sickness and unemployment (ASU) insurance and,​ as​ the​ name suggests,​ it​ covers your mortgage repayments if​ you​ have an​ accident,​ fall ill or​ lose your job.

Most policies will provide cover for a​ period of​ 12 months. Your policy should cover the​ full amount of​ your mortgage and linked expenses such as​ other insurance policies and pension plans.

Many providers of​ payment protection insurance will offer modular coverage. For example,​ you​ can choose unemployment only option if​ job loss is​ your main concern or​ an​ accident & sickness only module depending on​ what you​ feel is​ more important to​ you.

You won’t be able to​ claim money against your policy immediately after you​ make a​ claim. Typically,​ you​ have to​ wait three or​ four months - what is​ known as​ the​ deferral period – before you​ begin to​ receive insurance payouts.

Often however,​ for an​ additional charge,​ some insurers will provide back-to-day-one cover that covers you​ from the​ first day you​ make a​ claim.

Payment is​ made 30 days after you​ made your claim and you​ need to​ have been off work for at​ least a​ month. in​ addition most policies have an​ excess period – usually 30,​60 or​ more days – that is​ excluded from the​ payout should you​ make a​ claim.

Life Insurance

Life cover pays out a​ lump sum when you​ die,​ or​ earlier if​ you​ are diagnosed with a​ terminal illness. This lump sum payment may be used to​ pay off an​ outstanding mortgage or​ simply passed on​ as​ part of​ an​ inheritance.

There are two types of​ life insurance: Level term and decreasing term.

Level term insurance will often run alongside an​ interest only mortgage. it​ lasts for a​ set period and pays out the​ set amount you​ chose at​ the​ outset in​ case of​ death during the​ term.

Decreasing term insurance often run alongside a​ capital repayment mortgage. it​ offers a​ smaller payout year on​ year as​ the​ outstanding mortgage debt falls.

With both types of​ insurance there are many factors that the​ provider will take into account when calculating the​ premium. These factors will include; your age,​ weight,​ whether you​ a​ smoker or​ non a​ smoker and your medical history amongst other things.

A Five Point Plan When Taking Out Insurance

1. By speaking to​ a​ specialist adviser before you​ buy insurance could pay off. Ensure that you​ adviser is​ able to​ offer a​ range of​ policies from a​ variety of​ different providers.

2. Shop around for mortgage payment protection insurance (MPPI). Don’t just agree to​ take out the​ policy offered by your lender without doing some research of​ your own. Policies offered by the​ lenders are not always the​ most competitive in​ the​ marketplace.

3. Don’t forget to​ budget for your monthly insurance payments. For MPPI & Life insurance,​ the​ younger & healthier you​ are,​ the​ lower your costs,​ however payments can still easily add up to​ over £50 per month.

4. Never forget to​ find out what your excess is,​ or​ how much you​ need to​ pay before your insurance will pay out. Many policies have exclusions so don’t forget to​ find out what these are too.

5. Many people fail to​ adjust their insurance policies accordingly when their circumstances change. if​ you​ insurance policies are not reflecting your current commitments then you​ could find that you​ and your dependents are underinsured.





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