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Articles to help you choose - updated for Autumn 2011

Please download any of these articles in PDF format - please see the links in the left hand margin on this page. They are also reprinted in full below should you choose to print immediately. Click here to see what i:protects product range could do for you...

SPECIAL FEATURE

Free guide please click here for the Money Saving Expert Guide to Mental Health and Debt - highly recommended by i:protect. This free 40 page guide will help people with mental health issues as well as those caring for them.

Searching for more information about what insurance to buy? To assist we have put together an on-line reference library of recent press and magazine articles to save you time - we hope you find this useful and a short cut to making an informed choice to suit your needs. Please click here to see 'Help choosing the cover you need'  

Income Protection Insurance Buyers Guide

If you were suddenly out of work due to accident, sickness or unemployment could you cope financially? How long would your savings cover your essential outgoings before you ran into serious trouble? These are the questions this type of insurance is designed to help you address.

 

State benefits are frighteningly inadequate when compared to the true cost of living with the bills and expenses we all have to pay. Income Protection Insurance or Lifestyle Protection, as it is frequently called these days, offers hope to people who don't have substantial savings to fall back on. It has been designed to address the impact of lost earnings in times of unemployment resulting from involuntary redundancy, accident or sickness.

 

In short, it would enable you to pay your most important bills and provides the security no longer offered by the state.

  

Who should take out this Insurance Cover?

Anyone who does not have savings equivalent to at least 6 months earnings should be seriously considering Lifestyle Protection Insurance. The risk is more than just redundancy. "People are 26 times more likely to be incapacitated and off work more than 6 months than die before the age of 65"** this draws attention to the fact most people protect their families with life insurance should they die. However few realise it is just as import to insure their family against financial hardship when they are alive! What's more, the likelihood of needing to claim on a Lifestyle Protection policy is many times greater. So, in summary, if you have little saved but lots of financial commitments, you probably need this insurance.     

 

Are you in full time employment where there are no issues with redundancy at the moment?

This is the ideal time to buy this cover. You will then have the security of knowing you can call upon this insurance if things change for the worse. If your employer has made an announcement regarding major layoffs, you are probably too late to buy unemployment cover.

 

If you already have this insurance, perhaps just covering your mortgage payments or a single loan, you should check what you are paying at present. If you meet the criteria above, consider switching to an on-line provider as you are almost guaranteed to make a significant saving AND improve the total benefits payable. The high street names have a reputation for offering this cover at sky high premiums. You owe it to yourself to compare prices and take advantage of the stand alone premium rates that can be 30% of what you are paying at present.

 

 

  

How much cover do you need?

Many providers, including the leading comparison web sites, give you a simple calculator. However, all you need to do is to add the following together to understand the minimum amount you require to cover your essential monthly outgoings.

 

• Payment of your mortgage or rent
• Home improvement and/or car loans
• Important insurance premiums
• Credit card repayments
• Utility bills
• Food bills

 

Once you have this figure in mind, consider if you need Accident and Sickness cover, or the more popular Accident Sickness and Unemployment cover. Some people opt for just unemployment cover, however this is not so widely available. It is also hard to recommend, as a serious injury or illness have just the same devastating effect on personal finances as redundancy.   

 

  

Features to look for 

Virtually all Income Protection / Lifestyle Protection Policies start paying out once you have been off work for an unbroken period of between one and 180 days. The longer you can do without the payment of benefits, the cheaper the cover. This is called the deferment or excess period.

 

The better providers enable you to vary this excess period so you can reflect any sickness benefit scheme your employer might have. Typically, your company scheme might pay you in full for 3 months, after which you would want your own policy benefits to start. Equally, if you were made redundant, you might need your payment period to start without delay. So select excess periods to suit your circumstances, especially where you need to vary the excess period between unemployment and accident/sickness cover. You are also likely to save money this way.

 

Most policies will pay out for a period of 12 or 24 months. Think very carefully if considering anything less than 12 months cover, especially in the current economic climate. By far the majority of providers offer 12 months as standard. Cheaper 6 month and 3 month benefit period policies are available, however you must be very confident you could get back into work within this short period.

 

You will always be limited to receiving benefits that do not exceed your take home pay. Some policies are more restricted than others. Many only offer up to £1000 per month. Several more are restricted to 50% of your gross salary. However, there are policies that offer 60% or more of gross earnings and a higher maximum monthly benefit. Both are better matched to modern needs and give you more scope should you need to increase your benefits in the future. Claim payments are not subject to tax or national insurance. 

 

 

Securing best value

Premium rates vary widely and it pays to shop around. The leading price comparison websites like Moneysupermarket are very useful for this. Moneysavingexpert.co.uk is also a very useful guide to finding the best value. Generally speaking, the lowest premium rates are charged by the internet providers simply because their costs are lower. They are able to handle the majority of applications without complex underwriting or interviewing the customer.

 

For those that fall outside of the criteria that are easy to underwrite on line, the strongest recommendation is to seek the advice of a specialist independent broker. They can tailor a Lifestyle Protection policy for you, it may contain one or two restrictions (for example in respect of pre-existing medical conditions) however this personal service will be reflected in the premium charged. Try on-line first. You may be pleasantly surprised just how low cost this cover can be.

 

  

Questions when you go on-line for a quote

• Your name, age and contact details
• If you are employed or self employed
• The company you work for - sometimes details about any redundancies
• Your role within that company
• How much money you need to pay your unavoidable outgoings each month
• Would you want Accident, Sickness and Unemployment cover (recommended) or only an element of this cover? Note providers of unemployment only are limited.

 

When you want payments to commence - the majority of buyers ask for the compensation period to commence immediately ('day one cover'). You will usually be offered a choice of 'day one cover', 30 day, 60 day or 90 day excess periods. Some even offer 180 days or more - choose what suits you.

If you want the insurance to pay for 3, 6, 12 or 24 months (most people select 12 months)

On-line premiums are usually only payable by monthly direct debit. This is ideal as you can keep the cover for as long as you need it. Say you have a change of circumstances, you can always contact the provider to increase your benefits or indeed cancel your direct debit if you come into money. There is no need to pay a full year's premium in advance. 

 

 

Buying - value for money

You can choose up to 60% or more of your gross monthly income paid free of tax or NI contributions (usually subject to a maximum payment between £1000 and £2000 per month)

A back to work service - this is surprisingly undersold by the majority of providers as it offers genuine assistance for people getting another job. This includes advice, CV writing etc. Some go further and assist with managing medical conditions including arranging physiotherapy for example.

 

The providers terms vary to some degree, many policies offer individual help with redundancy matters and tax information. It is worth noting that these services are delivered by contracted specialists and not by general insurance company claims departments. They deliver help - usually phone based - when you most need it.

 

 

How much will it cost?

It depends on your age and occupation, plus of course the level of compensation you choose and deferment period. Generally speaking, with age comes higher premiums that reflect the regrettable truth that, as you get older, it is harder to get back into work and takes longer to recover from an accident or medical condition.

 

If you are in a relatively low risk occupation and are one of the majority who can be insured without any query, you will be in a position to take advantage of internet rates. If so, your premiums will be very competitive indeed. It is likely you will receive a good level of benefits for just £30 to £40 per month. 

 

Equally, if you already pay for 'Payment Protection' with your mortgage or loan, a stand alone policy could save you a small fortune. Check if it would pay you to switch.

 

 

And finally 

With widespread reports in the press about the majority of employers either freezing recruitment or contemplating redundancies, please don't fall into the trap of thinking you could simply walk into another job like in 2007. The landscape has changed fundamentally. We have entered a period where, once you lose your job, it is very hard indeed to get back into work and the competition for vacancies is fierce. 

 

Research in 2008 published by the Yorkshire Building Society*** identified that if their earning power was lost, a third of people are just 11 days from financial meltdown. Already juggling bills with the steep increases in fuel and food, most could never save £1000's necessary for a rainy day fund. However £30 to £40 per month for Lifestyle Insurance to deliver the equivalent security is practical and this premium can be absorbed within most household budgets.

 

If this is your financial situation, please give some serious thought to buying Lifestyle Insurance. It could protect your family from the misery of mounting debts, credit blacklisting and potentially losing your home.

 

 

** Source IAD Information Centre (DWP) 5% sample, 2005, ONS Annual Abstract of Statistics 2005

 

*** Source Yorkshire Building Society Survey Daily Mail 25 July 2008

   

Dennis Haggerty FCII  M IDM

Marketing Manager iprotectinsurance

Wessex Group

Winchester

Hants  SO23 8RZ

 

Original Article Dec 2008 updated 24 August 2009

 

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Top Ten Tips

Buying Mortgage Protection, Income Protection, Payment Protection Insurance 

1. Why take out this cover?

State benefits are pitiful compared to the real cost of living for the average family or young couple living in the UK today. Just because you are unable to work does not mean your financial commitments are put on hold, typically mortgage, personal loan and credit card repayments will rapidly turn into red demands and place your credit worthiness at risk. This is one of the greatest concerns in the post credit crunch era. Trying to secure a re-mortgage deal with an impaired credit history is becoming a major challenge.

Recently the Government announced changes to Income Support Mortgage Interest (ISMI) - benefits would meet mortgage interest payments after 13 weeks of unemployment. Disregarding any issues created by second charge mortgages, this measure may allow many families to keep a roof over their head. However there is no such thing as a payment holiday for all those other expenses such as council tax, utility bills, loan repayments, food bills etc that cannot be avoided.  

ISMI appears to be a safety net to endeavour to keep a customer in their house rather than losing it - a last resort.  Mortgage Payment Protection Insurance does far more to protect a customer's financial standing by maintaining their mortgage repayments and associated costs - a first resort.

Key things to bear in mind when considering ISMI and how it might affect you decide the cover you need in the event of being off work in respect of Accident, Sickness or Unemployment.

• ISMI is means tested - there is no guarantee it will be paid
• Means testing is based on circumstances at point of claiming, which would take into account factors such as partner's income and savings
• ISMI would ordinarily only have parallels to the Unemployment element of MPPI but not the Accident & Sickness
• ISMI pays interest only - it is not at the customer's rate of interest, it is based on a Government rate. For customers on fixed rate mortgages, this could be considerably lower than their actual repayment
• ISMI is capped at £175,000 interest
• ISMI doesn't cater for further advances not for renovation (e.g. debt consolidation is not included)
• ISMI doesn't pay until after week 13
• ISMI isn't payable for those aged 60+
• ISMI doesn't include additional costs such as home or life insurance
• ISMI provides no "back to work" assistance which is common in Mortgage Payment Protection Insurance

 

2. When to apply for Income Protection or Mortgage Protection Insurance

Are you in full time employment where there are no issues with historic job cuts or impending redundancies at the moment? This is the ideal time to buy this cover. You will then have the security of knowing you can call upon this insurance if things change for the worse. If your employer has made an announcement regarding job cuts or imposed wage freezes, you are probably too late to buy unemployment cover.

 

If you already have this insurance, perhaps just covering your mortgage payments or a single loan, you should check what you are paying at present. Consider switching to an on-line provider as you are almost guaranteed to make a significant saving AND improve the total benefits payable. The high street names have a reputation for offering this cover at sky high premiums. You owe it to yourself to compare prices and take advantage of the stand alone premium rates that can be 30% of what you are paying at present.

 

3. Know what is available to you and what you should buy to meet your needs

Mortgage Payment  Protection Insurance (MPPI)  is designed to cover the amount you pay for your mortgage each month. You can usually top up the amount by up to 25% more to contribute toward other household expenses. Premiums are very competitive and this probably represents just about the minimum amount level of protection for a couple/family if one wage earner is unable to work. It will meet most commitments in the short term, however almost certainly after a few months the average family will need to have some savings they can dip into.

Income Protection Insurance (often called Lifestyle Protection) is very similar to MPPI however the approach is essentially different. The cover offered to you is to replace the bulk of your post tax income if you are unable to work. When calculating the benefit you need you can take into account all of your significant outgoings. You are not limited to your mortgage repayments. As with all providers there are limits. For example iprotectinsurance restrict the maximum monthly benefit to £1500 or 65% of GROSS  monthly salary whichever is the lesser. It should still be more than sufficient to meet the needs of the majority of people who do not want to fall back upon savings, go into serious debt or make major sacrifices in terms of their lifestyle.

Critical Illness or long term Income Protection Insurance - there are different sorts of Income Protection policies, iprotectinsurance for example sell what are called short term policies that pay for up to a year for any one claim. These are low cost and easy to buy. They should not be confused with Critical Illness policies or other long term Income Protection policies that are usually sold by Life Insurance companies and require long forms to be completed with medical evidence. With individual underwriting and a commitment up to retirement age, these are understandably far more expensive. These are mainly bought by those who fear long term disablement, rather than to people with immediate concerns of being off work for up to a year due to accident, sickness or unemployment.

Payment Protection Insurance (PPI) - none of the above should be confused with Payment Protection Insurance that is often sold alongside loans or linked to credit card debt. Payment Protection has gained a very bad reputation for offering poor value for money and many High Street names and suppliers have been vigorously dealt with by the FSA and Competition Commission. Due to the adverse publicity this has created, many people are finally realising they are paying far too much for this cover each month and are replacing it with Income / Lifestyle Protection insurance at a fraction of the cost.

 

4. Calculate how much cover you need

Here is an example of Mortgage Payment Protection it is a very simple calculation:

Average monthly cost of mortgage repayments: £700 plus (up to max) 25% for additional expenses : £175   = £875 benefit required.

Is this enough to meet your needs? If not consider an Income Protection Policy like i:protect Lifestyle

Here is an example of how to calculate an i:protect Lifestyle/Income Protection monthly outlay/benefit required  

Assumes insurance is sought by an individual with a typical annual wage of £35,000.  

• £500 Mortgage or rent
• £ 200 Home improvement/car loan
• £400 Food, utility bills and fuel
• £150 Essential insurances/council tax
• £150 Credit card minimum repayment

Total   £1400

These examples also illustrate to greater scope for Lifestyle Protection / Income Protection to cover far more than mortgage related expenses

 

5. What do you want to be covered for?

In this respect, Mortgage payment protection and Lifestyle / Income Protection are just the same. You will find this to be the case with the large majority of policies on the market. They offer cover for Accident and Sickness or Accident Sickness and Unemployment. Most people will only be interested in Unemployment cover in the mistaken belief Accident and Sickness will not be an issue for them. It may come as some surprise that iprotectinsurance for example paid more claims for people off work due to Accident and Sickness in 2008 than for Unemployment. It should be remembered that a person who is fit and well can start looking for work immediately. Someone who is ill may have nowhere else to turn when their company sick pay scheme runs out as they cannot earn again until they are well. By 2009 the balance had changed and more people claimed for unemployment. However the level of Accident and Sickness related claims remained unchanged and generally speaking it is more likely for someone to be unable to work for over a year for medical reasons than due to unemployment.

Always look for policies that will cover you for back related injuries and nervous disorders/stress. Some older policies will exclude one or both of these. It is recommended you replace these with a modern policy where the cover was written with treating customers fairly in mind. Nervous disorders and back injury accounts for approximately half of the accident and sickness claims submitted to iprotectinsurance for example. Bear this in mind when comparing policies and considering your needs. Please note that certain limitations may be imposed by providers such as requests for medical evidence before they will make payments for back related or nervous disorders. It is well worth a read through the Key Facts or Policy Wording when comparing insurers.

  

6. How long could you afford to wait before you need to claim under your policy?

The longer the excess period, (that is the time you wait before the policy benefits are paid), the cheaper the policy will be. Some insurers refer to this as the deferment period. The flexibility of the insurance products you consider is very important as only you will know when your policy needs to pay out.

This will depend upon your current contract of employment and any company benefits you enjoy, particularly the generosity of the sick pay scheme that may allow up to 6 months off work at full or half pay. Therefore anyone with this level of benefit may wish to take an excess of at least 90 days in respect of accident or sickness. Conversely, you may only be entitled to statutory redundancy benefits, in which case you may feel only a 30 day excess would be sustainable before benefits commence for unemployment.

Most policies have excess periods that are the same for Accident and Sickness as well as Unemployment. As you would expect from a guide provided by iprotectinsurance, we would want to draw to your attention to both our Mortgage and Lifestyle (Income) Protection policies having independent excess periods for Accident / Sickness and Unemployment.

 

7. Best Prices

The best rates are available on line where Protection Insurance can be bought without supporting the cost of providing a telephone sales, broking or advice service to customers. Not paying for the services of an intermediary or commission to a High Street Bank will produce the biggest savings. Anyone who already holds a monthly paid Payment Protection Insurance, perhaps linked to a personal loan, will almost certainly find they can make a significant saving by cancelling this and buying the same level of protection on-line.

However a word of caution, in the current economic climate NEVER cancel an existing Mortgage or Income Protection policy until you are accepted in writing for a replacement or alternative policy. This is because policy underwriters have significantly changed their acceptance criteria as the UK economy has moved into recession. For example, at this time, the majority of people in Financial Services and in the Building Industry are not accepted for unemployment benefits. This was not the case prior to 2007.

Moneysupermarket are a good source of comparison quotes however always read the cover offered very carefully. Some policies look very cheap, but are often restricted. For example, not all are 12 months benefit. All providers vary in terms of the individuals who they will cover (acceptance criteria). Ultimately price comparison sites compare price, they are not always the best measure of quality. Because only the lowest priced products feature, there is a tendency for providers not to put all of their product range on the Price Comparison websites. It pays to shop around and to be prepared to compare the small print.

A favourite for consumers looking for forthright advice regarding how to get good value is MoneySavingExpert.co.uk. They have a specific section on buying Mortgage Payment Protection Insurance (MPPI) that is well worth reading. They offer shortcuts to several lost cost providers.

As a final source of comparison information, try the FSA website. They are entirely independent and not trying to sell you anything. Their tables also include quality measures. As a result, these tables are not necessarily easy to use, however they represent a good place to research a shortlist of suppliers who may meet your needs. A link to the FSA is provided from the iprotectinsurance home page.

 

8. What happens if your application is not accepted when you apply on-line or you prefer to speak to someone to get advice?

Applying for Income Protection, Mortgage Protection or Payment Protection Insurance on-line is a great way to save money. However it is not for everyone. For example, iprotectinsurance have found that the majority of applications are accepted automatically, however occasionally applicants are asked for further information before the underwriter will accept/approve an offer of cover.

Unlike some providers, iprotectinsurance underwrite business at inception. This means endeavouring to do all that is humanly possible to ensure anyone who takes out a policy will be able to claim on it. If iprotectinsurance reject an application, it does not mean that, say, a Mortgage Protection Policy would not be offered elsewhere. The acceptance criteria of different underwriters varies.

If applying on-line does not work out for you, it may simply mean that you are one of the many people in circumstances where they really need advice on what to buy. This is where the specialist broker or Independent Financial Adviser can add value to their clients. Ultimately this advice will be reflected in the price of the product or their charges. The restrictions necessitated by an on-line application process are appreciated. For example, iprotectinsurance now provide their customers with a bespoke service through a link to a trusted specialist broker who is authorised by the FSA to give advice. Their advisor will assess your needs and entirely free of charge, provide a no obligation quotation.

 

9. If your circumstances change

You might get another job, it may offer better benefits for sick pay but, as a new starter, you will not qualify for redundancy terms. In this situation you will want to tailor your policy to your needs by, for example, having an increased excess for accident and sickness benefits and have back-to-day-one cover for your unemployment benefits. Also, it is ESSENTIAL to tell your Protection Insurance provider if you change your job so they understand your situation. There is every possibility you could save some premium if better employment terms enable you to increase the excess period on your policy

At iprotectinsurance for example customers are encouraged to keep in touch and to email or ring to keep their policy up to date.

 

10. The assurance of dealing with a Bona fide supplier and underwriter

Look for providers registered with the FSA, this means they are regulated, closely monitored and the underwriters must meet strict rules concerning their solvency to be allowed to trade in the United Kingdom. Regulation is thorough and the FSA can impose huge fines or simply close a provider down who does not comply with the standards they have laid down. So FSA registration is important.

 

 

A note regarding your free download

 

We hope you have found Top Ten Tips for Protection Insurance useful. We seek to revise and constantly improve the scope and content of the information we provide to customers and potential customers of iprotectinsurance. Therefore we would like to encourage you and other readers to ask questions and feedback on any aspect of our Buyers Guide, Top Ten Tips etc - please use our website and select the 'contact us' option. We believe in acting upon customer led improvement.

Please bear in mind one very important point, iprotectinsurance is authorised to provide insurance by the FSA however we are not authorised to offer advice to individuals in respect of their individual insurance needs. We cannot offer what is called an 'advised sale' this is where specialist brokers and IFA's can assist you.

We do however hope to provide potential purchasers, through our website, a wealth of general information, including links to other relevant resources. These should enable you to make up your own mind. Treating customers fairly is a core value of iprotectinsurance and therefore we have only used examples which relate to this company and have avoided comparison with others with the intention of being as objective as possible.

 

Dennis Haggerty FCII M IDM

Marketing Manager iprotectinsurance

Wessex Group

Winchester

Hants SO23 8RZ.

 

Top 10 Tips.doc version 2 16.12.08 revised 24 August 2009

 

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Articles published by i:protect

 

Don't Make The Same Mistake As 1000's Did In 2008, Insure Your Income Against Unemployment Now

Published 19 August 2011

The stock market has dropped dramatically wiping out a year of gains and more. Is this 2008 all over again? Are the current issues creating panic in international markets the signal we are about to slide into a 'double dip' recession? Will this mean we are going to see a dramatic reduction in job numbers as recent improvements in UK employment are inevitably thrown into reverse - probably.

Violent market falls are just another sign that it is NOT business as usual and that things have changed forever in an economically conjoined world. Now more than ever, it is critical for individuals to take control of their own financial future, because no one, especially the cash strapped UK Government, is going to take care of them.

Anyone in a job where things are looking OK at the moment, but find they have financial commitments that would use up their savings in a few months, should be considering the following questions;

1. If I am made redundant this year, how will I pay all of my bills?
2. If I lose my job, how long will it take to get another? (note; the statistics from a leading income protection insurance provider indicate that their customers have an average gap between jobs of 6 to 8 months)
3. Can I afford to keep my home and for my loved ones to continue to live in the circumstances to which they are accustomed?

For those who calculate that they would be in serious financial difficulty if they, or their partner, were out of work, it is time to think about this seriously. Home owners who have less than 6 months take home pay in savings could find themselves in serious trouble with their mortgage company and other creditors. They should at very least consider buying mortgage payment protection Insurance which would pay their mortgage and (typically an additional 25%) toward their other household bills.

However mortgage payment protection Insurance alone rarely meets all of the financial commitments of the average family, even though it does help to make any savings last far longer. For anyone without much saved, perhaps just enough to keep them afloat for a month or two, short-term income protection insurance is almost certainly a better option.

Some couples will already have a mortgage payment protection cover they arranged some while ago when setting up their mortgage. However, this might only pay £500 per month to cover what is now a relatively small mortgage. Fortunately, this existing policy would not prevent either one of the couple (usually the highest wage earner), from taking out a separate short-term Income Protection Policy to 'top up' their benefits to nearer, say, £1,500 per month.

If home owners already have a policy from a building society or mortgage broker, they can usually get an additional policy at a much lower price from an online specialist provider. To confirm this and to get an independent and unbiased price comparison, it is well worth looking at the Money Advice Service set up by the UK Financial Services Authority.

This online service has been specifically designed to help consumers make informed choices about financial products. The Money Advice Service do not sell anything themselves or on behalf of anybody else. They were set up by the UK Government and are paid for by a levy imposed upon the financial services industry. Their price comparison tables for mortgage payment protection Insurance, short-term income protection insurance and Loan Insurance are the most comprehensive available.

If we have a re-run of 2008, the providers of mortgage payment protection and short-term income protection insurance will soon be refusing to accept people in many 'economically vulnerable' occupations. Even people employed in manufacturing and financial services, where jobs have been in demand over the last 12 months, will find cover extremely difficult to buy at a reasonable price. So anyone who needs this cover is well advised to buy it now and not risk the Underwriters either putting up premiums again or simply refusing to insure people.

In 2008, thousands of people seeking this type of cover were turned away as the underwriter's appetite for new business disappeared at the same rate the banking crisis deepened. Since then, the cost of this cover has come down. It is certainly not reducing any further in the wake of this latest turmoil gripping financial markets. In short, if you need mortgage payment protection or short-term income protection insurance, grab it while you still can.

For a Free 'How To' guide showing you how to use the Money Advice Service tables to find the best price Mortgage Payment Protection, Loan Protection and short-term Income Protection Insurance, check out i:protect's public information initiative @iprotectinsure and get a free information pack. There is nothing for sale, just quality empowering information so you can decide what is right for you and your family.

Dennis Haggerty FCII M IDM Marketing Manager iprotectinsurance.co.uk is a UK Income Protection Insurance Expert and specialises in Lifestyle Protection, Income Protection and Mortgage Payment Protection Insurance.

Click this link for details of the complete i:protect Insurance product range if you would like to see a comprehensive range of products offered by one of the UK's leading low cost protection product providers. 

 

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Bank's Toxic Mortgage Loans Worry Customers

Published 15 June 2011

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Redundancy Fears? Things You Must Know About Keeping Your Home

Published 11 April 2011 

A total of 36,300 UK properties were repossessed last year according to the Council of Mortgage Lenders. They forecast that this will rise to at least 40,000 during 2011. Experts believe this number could climb much higher if the Bank of England starts to increase the interest rate this year. Despite this, the level of repossessions is not as bad as was feared at the beginning of the recession due to three important factors:

1. The record low base rate - although likely to rise soon, the Bank of England have maintained this for an extended period making tracker mortgages very affordable.
2. Mortgage Payment Protection Insurance either bought direct on-line or from mortgage providers, paid out record levels of claims for victims of redundancy.
3. Government initiatives to influence and encourage mortgage providers to find ways of allowing people in arrears to remain in their homes.
4. Direct intervention through the benefits system targeting people with short term income issues and the vulnerable.

Anyone concerned about what could happen if unemployment or illness prevented them from working and paying their mortgage should know the answers to these questions:

1. How much should someone have in savings in case they lose their job?

Following redundancy, the average person is out of work for six to eight months. If living in an existing area of high unemployment, it might be more appropriate to think in terms of potentially 12 months. Having savings equivalent to take home pay for this period should be considered the minimum safety margin.

2. No savings?

Consider the low cost option of buying Mortgage Payment Protection Insurance. The best deals are on line and price checking on the big Price Comparison websites, or consumer websites such as Money Saving Expert are a great place to start. However, some people do not qualify, or leave it too late to buy, or simply can't afford the typical 40 per month premium.

3. Already out of work and struggling to pay a home loan?

Contact the lender right away. The major providers have to handle borrowers in this position "sympathetically and favourably". People they consider to only have short-term problems may be allowed a 'repayment holiday' although the missed payments are added to the arrears to the home loan

4. Is switching to an interest-only mortgage and option?

This will only reduce the monthly repayments, however the reduction may be enough to stop a monthly budget and other debts spiralling out of control.

5. Increase the mortgage term instead?

By increasing the mortgage time period (more viable for a younger person), has the immediate effect of reducing monthly repayments. However, the extra interest this adds to the total debt can be quite frightening.

6. Need advice?

Many of the larger mortgage providers have telephone helplines and a debt guidance process. They are certainly the best first step rather than asking the cashier at a local branch.

7. Is there independent advice available?

The best known are Citizens Advice, the Consumer Credit Counselling Service and the National Debtline. These are particularly useful following contact with the mortgage lender as they will also assist regarding other debts including speaking to those lenders on behalf of the person in financial difficulties

8. Will the Government help pay a mortgage?

There is a means tested benefit designed for people with only temporary issues eg where one of two wage earners are out of work; Support for Mortgage Interest, pays the interest on a mortgage up to 200,000 after 13 weeks for up to 2 years. However receiving this benefit is linked to the qualification for other benefits and somewhat complex. It is considered by the Government as a benefit of last resort where the claimant has exhausted all other avenues with their lender and is threatened with repossession. It does not cover arrears, insurance policies or pay off any of the capital sum. Without other money to meet the usual bills, despite qualifying for this benefit, homes of the financially vulnerable are still likely to be repossessed.

9. Massive negative equity; why not just hand back the keys?

This is a really bad idea. Interest will continue to build up on the debt until the property is sold, because this takes some time, repossessed properties are frequently auctioned or sold off cheap. If the sale does not cover the debt, potentially the person who handed back the keys could still be sued for the balance.

10. Sale and lease/rent back seems an attractive option?

There are some unscrupulous companies and many instances of sharp practice that anyone considering this should precede with utmost caution. Many are lured by the attraction of their debts being wiped out overnight and still being able to live in their 'own home' just paying to lease or rent. These companies often pay just a fraction of the true value of the property and lease agreements can be as short as 12 months. Tenancy agreements usually last 6 to 12 months. Thereafter the lease payments or rent can rise. Should the tenant fail to pay they can be evicted. Worse still, the family home the person thought they had secured can then be sold by the company on the open market at a substantial profit and the tenant walks away with nothing.

11. Are vulnerable people given extra help through the State Benefits?

There is the Home Loan Rescue Plan run by the Local Authority and part of their social housing provision. They arrange an assessment of the property and then consider either a 'shared equity loan' or a 'Government mortgage to rent' scheme, depending on the claimants circumstances. The council will involve a Registered Social Landlord (RSL) or an independent housing organisation registered with the Tenant Services Authority. However it must be understood that the home owner will lose part or all of the equity in their home.

12. What should the average family do?

Reliance upon the State in these circumstances is not really an option for the average family as they would have to be in truly irreconcilable financial difficulties to qualify. Benefits are far from generous and other debts, not covered by these mortgage specific schemes, can still result in repossession. For example, people with serious debts in the past may have gone down the route of debt consolidation. They will have guaranteed payment of their consolidated loan against the equity in their home. The benefits system does not treat consolidated loans as mortgages and these finance companies come still repossess a home if their customer's payments are not kept up.

There is a strong case for any family lacking enough savings to fall back on if the main wage earner cannot work, to immediately apply for Mortgage Payment Protection Insurance. Critically, it can only be bought when the applicant is in steady work and their firm has not announced any redundancies. Provided they qualify. Paying monthly premium that is less than the price of a tank of fuel for their family car, which makes this cover very affordable.

Most people choose a benefit of around £1,000 per month. It is paid to them if they are unable to work due to accident, sickness or unemployment. Anyone without a mortgage to pay, or wants to top up the benefits they already have under an existing Mortgage Payment Protection policy, should look for Short Term Income Protection Insurance. On-line specialist providers offer the best value for money and the UK Governments CFEB (previously FSA) consumer website the Money Advice Service strongly encourages purchasers to shop around on-line for the best deals.

Link to the article

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Middle England Under Pressure to Pay New University Fees Up Front - Can Insurance Help?

Article published 15 December 2010

So far, the impact of the recession has not really been felt by people who have kept their jobs. This is the case particularly for professionals and others who in the past would be described as ‘comfortably off’. This group represent a large section of British society that finds itself described as occupants of a mythical place called Middle England. However, as the Government looks for ways to balance the books, inevitably they will take more money from those who have it, rather than those who don’t. So Middle England look out! As the back bone of the tax paying, law abiding majority; you are the easiest source of revenue.

Since rechristened the ‘squeezed middle’ by the Labour Party, even those disinterested in politics have been watching with increasing alarm the gathering storm of Coalition benefit cuts and tax rises.

The combination of the removal of Child Benefit for households with one earner on 40% tax will be compounded by moves to lower the threshold for those who benefit from Tax Credits. However the real crunch will come in 2012 for families with children who are entering university for the first time. They will be hit by the planned tripling of university tuition fees.

Middle England realises how important a good education is to ensure it’s  offspring achieve the best start in the world of work. This is now juxtaposed by the knowledge of just how damaging a large debt can be for their children’s future quality of life. For parents who have worked diligently to build up their savings to support sons and daughters through university, this hike in tuition fees has come as a bombshell.

Up until recently student debt was viewed as a necessary evil. However the modest loans and low interest rates made this acceptable. Now the proposed fees are close to three times higher, this has created a future tax nightmare for graduates. Causing more alarm, even among those who see £9000 per annum fees as inevitable, are the close to commercial rates of interest to be charged on those student loans. Parents are particularly aggrieved that their sons and daughters will be faced with a heavy debt burden, at the very time in their lives when they might be trying to set up homes of their own.

Although the final details have yet to be published, there is more than a suggestion that the Government are also looking at ways to penalise early repayment of these loans. Therefore, with its unavoidable interest charge, for the graduate, this will become a massive financial penalty for achieving future success. The political ramifications of this have yet to be fully understood, however the clock is counting down toward implementation. Many parents are already looking for ways to meet these tuition fees themselves to avoid a bleak financial future for their children.

Teenagers contemplating their university options are mindful of the potential weight of debt they would carry around their necks. They either need to be lucky enough to come from families that have the means to pay, or poor enough to qualify for a combination of benefits and bursaries to escape the majority of fees. Those students from England stuck in the middle may decide it simply is not worth going on to university. With minimum student living expenses of about £6000 per annum, when added to £9000 tuition fees each year, will mean a student will accumulate £45,000 of debt in just 3 years. When taking future interest payments into account, this could mean paying off nearer £50,000 over time.       

Imagine a young couple who met at university and subsequently worked to achieve reasonably paid employment after a few years. They could easily have debt liabilities of close to £100,000 between them. That is ghastly and will add nothing to the willingness of mortgage providers to lend them enough to buy a home of their own. Many parents will have sacrificed a lot to enable their children to go to university. To see them subsequently struggle to even get on the property ladder, will engender deep resentment. 

Indeed many hard working parents will openly question whether they should do anything to encourage their children to think about university, given the potential size of the financial millstone this will create for them. Will a full time university education prove to be only a luxury enjoyed by the rich and a means tested benefit for the poor? The children of the ‘squeezed middle’ being left to battle their way up the corporate ladder with the Open University offering one of the few debt free routes to a degree.    

For the majority of children from Middle England who have recently commenced studying A levels, there are new risks that they will now need to assess regarding their future education. Unless they are very bright, with straight A’s to secure a place at a flagship institution, is there much point even thinking about university? However much fun student life might be, will the value they gain from an Arts degree at ‘Anywhere University’ be worth incurring so much debt?

The reaction of parents still digesting the ramifications of the new fee charging regime are as yet unknown. Many could be deciding to postpone retirement to work for several years yet to pay for their children to get through university relatively debt free. The need for more income will see many more dusting off their CV’s as well as demands for students to find better work to pay their way.

For parents, keeping their jobs and a second income coming in to get two children through University may become much more important. Inevitably contingency plans will need to be considered and Unemployment Insurance or Income Protection Insurance paying £1000 per month, if one of the parents is unable to work due to accident sickness or unemployment, could offer an answer. This insurance would guarantee the monthly income that many Middle England parents will soon see as essential for them to afford to pay for their child’s university education.

Dennis Haggerty, Marketing Manager of protection insurance specialist i:protect commented, “We see university fees creating a large and unexpected hole in the budgets of many families who simply cannot contemplate their children leaving university in so much debt. This in turn will create a demand for our product from a section of the market that hitherto could cope by taking money from their own savings if they were out of work. Now finding £15,000 per annum for each son or daughter at University, in addition to their usual household expenses, will drive the search for alternative sources of funding. For example, one of our policies with premiums of just £10 per week would pay £15,000 in benefits if the policyholder was unable to work for a year”

The lifetime habit of Middle England to support it’s children through university will be placed under severe strain. However, for the benefit of their children’s future, provided they are in work, most will ‘bite the bullet’ and pay as much as they can. More parents than ever may need to agree to pay the full cost of tuition fees for their offspring, just to convince them to take advantage of a university education. Otherwise many potential university students may refuse to go in fear of the financial consequences of their decision.

Helping to mitigate risk of lost earnings for parents contemplating paying these tuition fees ‘up front’ is worth consideration. Those same parents will soon be attending university open days for their sons and daughters to weigh up their options for future education. It would be nice to have the confidence that a minimum guaranteed income would be received, even if one of the parents were out of work for some time. Unemployment Protection or Income Protection Insurance does offer a viable ‘plan b’ in an uncertain job market. 

Link to article 

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Private Insurance to Top Up Inadequate UK Unemployment Benefits 

Published 23 November 2010  

At a time when our cash strapped Government are urging people to stand on their own two feet and not to rely on the State to provide, those who can, are considering their options. The greatest concern for people in both the public and private sector is unemployment and how to cope financially if are out of work. For those with only limited savings to fall back on, because of the pitifully low level of state benefits, a private provision to top these up has become a priority.

The UK insurance industry has responded with several products people can buy directly on-line to meet this need.   

Unemployment Protection Insurance is designed to enable the customer to continue repaying their debts, such as mortgages, loans and credit cards, if they have to stop working due to accident, sickness or unemployment. The BBC reported on 22 November 2010 that some people are putting their homes at risk ‘due to £600 debts.’ This is both frightening and so easily avoided by anyone who has the foresight to grab themselves an Unemployment Insurance policy when it is available to them.

But there is a problem. Many people only think about buying an insurance policy to cover their debts and other living expenses when it is too late. This is because, when taking out the policy, they must be able to truthfully state that they did not expect to be unable to work. Otherwise the Insurance Company would have every right to refuse to pay. So, if a firm or organisation has not made any announcements about laying people off, it is well their employees giving serious thought to this right now.

The better Unemployment Protection Insurance policies will offer a route for the customer to purchase the type of cover that is best value for them. In this regard, it is worth noting, that covering mortgage repayments and a small amount of household expenses each month is usually much cheaper than asking for, say, £1000 monthly benefit that is not linked to any particular repayments. The later is the province of short term Income Protection Insurance, good, but rarely the cheapest to buy.

How much cover?

Anyone thinking about Unemployment Insurance should consider how they would cope if their income stopped or was reduced due to accident, sickness or unemployment. They must look at their own financial circumstances, including any other insurance cover or savings they already have. The great majority of people taking out this cover know they could cope if they were out of work for a month or two*. However, if this stretched out to six or eight months, they would be in deep trouble.

Savings can meet every day expenses such as food and fuel for quite a while, provided the weight of  large monthly bills (typically mortgage repayments, rent or loans) can be shouldered by an Unemployment Protection Insurance policy. Therefore this is usually the money saving approach that most people take when selecting their benefits, they buy a policy that will pay their important bills until they are back at work.

Who can apply?

These policies are offered to anyone over 18 and under 65 who live and work in the UK. Usually this cover can also be bought by people who are part time (working at least 16 hours a week) as well as the self-employed or individuals on fixed-term contracts,

 What is covered?

This insurance pays the policyholder the sum they choose each month as a monthly benefit for up to a year or until they go back to work. It is possible to buy a policy that pays out for up to 2 years, however as the average spell of unemployment at this time is up to about 8 months*, most opt for a cheaper 12 month policy. It is possible to claim more than once a year on this type of insurance.

What is not paid?

Unemployment