Travel insurance

What's it for?

If you are a UK resident you are entitled to free or reduced-cost, State-provided healthcare when visiting a European Union (EU) country as long as you have the necessary European Health Insurance Card (EHIC). However, in many other countries healthcare can be very expensive.

Most travel insurance plans will cover medical bills for £1m, and often more, as well as pay for an emergency air ambulance to bring you home for treatment in the UK. Travel insurance can also cover you against other mishaps while you're abroad, from lost luggage and theft to flight delays. Make sure you read the policy summary for exclusions – there are bound to be some. Also check for excess charges – some policies charge an excess per clause rather than one overall.

You could be offered travel insurance by the travel agent where you book your holiday, but you don't have to take their cover and generally travel insurance sold at the same time as a holiday, isn't covered by regulation. You can shop around and get the right cover for you. Find out whether your employer offers travel insurance as part of your benefits package.

What isn't covered?

You won't usually be covered for medical conditions you already have, or may have to pay extra to get them covered. Always ask if you're in doubt. Travelling against a doctor's advice may also invalidate your cover.


Important tips

1. Read the paperwork and ask questions if you don't understand anything.

2. Make sure you check what you're covered or not covered for.

3. Tell the insurance company if you have any existing medical conditions.

4. Find out if your employer provides health insurance as part of your benefits package.

5. Don't be pressurised to take travel insurance from your travel agent – you don't have to, and other policies may be more suitable for you.

Link to previous article Health cash plans (including dental insurance)

Health cash plans (including dental insurance)

What's it for?

Health cash plans provide limited cash sums towards everyday healthcare bills. Different policies cover one or a combination of healthcare such as dental care, optical care, physiotherapy, or stays in hospital.

So for example a policy will pay out a maximum of £100 per year towards optical care bills you have incurred, and £10 for each night you need stay in hospital (up to a maximum of say 16 nights). Most providers offer a range of covers with different levels of payouts, and the smaller the payouts the cheaper the premiums.

What isn't covered?

Some policies have age restrictions and will only cover you if you are under a certain age (often 65). If you've had health problems in the past (pre-existing conditions), the cash plan may not pay out on certain types of healthcare. Some plans also apply qualifying periods which means that they will not pay out towards any treatment undergone in the first few months of the policy, so shop around and make sure you get the cover you need.

Dental insurance

What's it for?

Dental insurance is a type of health cash plan that focuses on dental care. Most of these pay for treatments such as crowns, root canal work, bridges and dentures up to an agreed maximum each year. If your teeth are in good health you can also take out a capitation scheme: you pay a monthly fee in return for check-ups, regular treatment, X-rays and extractions.

What isn't covered?

Check your plan carefully. More serious work such as oral cancer, surgery and serious dental abscesses are often excluded. Some plans apply qualifying periods which means that they will not pay out towards any treatment undergone in the first few months of the policy, so shop around and make sure you get the cover you need.

Top tips

1. Read the paperwork and ask questions if you don't understand anything.

2. Make sure you check what you're covered or not covered for.

3. Tell the insurance company if you have any existing medical conditions.

Link to previous article Private Medical Insurance

Private medical insurance

Private medical insurance covers medical treatment and usually means you can get treated quicker than going on the NHS. Like all insurance the cover you get varies – but basic private medical insurance may pick up the costs of most in–patient treatments (tests and surgery) and day–care surgery, and some extend to out–patient treatments (such as specialists and consultants).

Cover can be purchased on a full medical underwriting basis, which means you will be asked a number of questions about your health and, based on the information you provide, the insurer will decide the conditions of your cover. You can also apply for cover on a moratorium basis, which means you will not be asked any questions about your health, but if you have suffered from any health conditions in the last five years, these will automatically be excluded from cover initially.

What isn't covered?

Before jumping in to look at the advantages of the insurance scheme and buying it immediately, it is always better to know what it does NOT cover. Here is a generalized list of what is not covered under the Private Medical Insurance.

-You can't take out cover now for treatment you know you're going to need.

-If you've had health problems in the past (pre–existing conditions), your insurer may also exclude those conditions from your cover. If you are asked to disclose these when applying for the insurance you must do so, or you could invalidate your policy, which means the insurance company won't pay out if you make a claim.

-It does not cover the treatment of chronic medical conditions. There are various definitions of chronic conditions depending on the policy, but broadly it is a long–term medical condition which is likely to continue to need regular or periodic treatment.

-Some exclude certain types of treatments such as out–patient treatments, routine treatments (such as health checks), dental care or experimental treatments.

-Most also exclude routine pregnancy, HIV/AIDS, fertility treatment, mental or psychiatric conditions, and elective treatments you may choose to have, such as cosmetic surgery.

Keeping costs down

Shop around: it's a competitive market out there and both cover and costs vary from company to company. You could choose:

-to pay a larger excess, which means you agree to pay more of the bill; or
-cover that only kicks in if NHS services are not available within a certain timeframe.

Be clear about what you need. You may not want the highest level of cover. Always compare what's covered by a policy, not just the price. Some might be cheaper than others, but they may not offer the same level of protection.

For more information see the private medical insurance guides provided by the Association of British Insurers.

Important Tips

-Read the paperwork and ask questions if you don't understand anything.
-Make sure you check what you're covered or not covered for.
-Tell the insurance company if you have any existing medical conditions.
-Find out if your employer provides health insurance as part of your benefits package.

Link to previous article Insurance for Protecting your health .

Insurance for Protecting your health

Every UK resident is entitled to a free healthcare from the NHS, but it is not comprehensive and covers only few basic insurance protections. Hence, you may like to consider buying health insurance so that you can have a choice in the level of care you want and receive. You don't have to take out health insurance but think about how you'd be able to afford medical treatment if you didn't want to use the NHS.

There are many different insurance products aimed at helping you compensate for the financial blow of medical expenses that you may have to incur. Some offer medical cover while you are holidaying abroad (travel insurance), some offer access to private care treatment (private medical insurance), and some pay a limited amount towards everyday medical bills (health cash plans).

Your employer may offer some of these in your benefits package. Or you can take them out yourself.

You can choose from the following:

• Private medical insurance: Private medical insurance covers medical treatment and usually means you can get treated quicker than going on the NHS. Like all insurance the cover you get varies – but basic private medical insurance may pick up the costs of most in–patient treatments (tests and surgery) and day–care surgery, and some extend to out–patient treatments (such as specialists and consultants).

• Health cash plans (including dental insurance) : Health cash plans provide limited cash sums towards everyday healthcare bills. Different policies cover one or a combination of healthcare such as dental care, optical care, physiotherapy, or stays in hospital.

• Travel insurance: If you are a UK resident you are entitled to free or reduced-cost, State-provided healthcare when visiting a European Union (EU) country as long as you have the necessary European Health Insurance Card (EHIC). However, in many other countries healthcare can be very expensive.

In the next articles, we’ll cover elaborate details about these insurance types for your health.

Link to previous article Income protection Insurance - II.

Income protection Insurance - II

This article is the second part of Income protection Insurance - I. Please read the first part before continuing with this one.

Cost of Income protection Insurance

You pay a monthly premium throughout the term of the policy. Cost depends mainly on:

• Your age – at the time you start the policy. Older people are more likely to suffer an illness, so pay more.

• Your sex – gender can have an affect on the premium you pay.

• Your health – at the time you start the policy. If you have existing health problems you might be refused cover or have to pay more.

• Your job – some jobs are more likely than others to contribute towards illness. For example, a bank clerk is deemed to have a very safe job but a deep sea diver runs high risks and so would have to pay more.

• Hobbies and lifestyle – for example, smoking makes you more likely to become ill, so you'll pay more.

• Waiting period – once you claim, there is a delay before payments start. You can choose how long this is - for example, from 4 weeks up to 104 weeks. The longer the waiting period, the less you pay.

Access

• If your health is poor or your lifestyle is considered risky, you may be refused cover or have to pay more than normal.

Terms

• Check whether you already have protection in place in case you get incapacitated, and for how long that protection would last. For example your employer may have an income protection scheme in place you can benefit from, or you may have a payment protection insurance that covers your mortgage.

• Check whether the policy reduces what it pays out if you receive state benefits or claim money under any other insurance policy.

• Some policies only pay out if you can't do any work, but you would have to be seriously incapacitated for you not to be able to work at all. Others cover being unable to do any work for which you are suited. The best pay out simply if you can't do your normal job, but premiums tend to be more expensive.

• Most policies would pay out until your reach age 65 or when you have chosen the cover to end.

• Check how different occupations are treated. Different insurers put the same job in different risk categories.

• Does the cover increase in line with inflation?
Some advisers suggest that critical illness cover (CIC) – which pays out a tax-free lump sum if you are diagnosed with a life-threatening condition listed in the policy – is a cheaper and simpler alternative to income protection insurance. But there are lots of common situations when CIC would not pay out – for example, if you had back problems or a stress-related illness. Additionally, not all occurrences of the critical illnesses listed are covered, for example some early stages of cancer are not covered.

Link to previous article Income protection Insurance - I.

Income protection Insurance

How does it work?

If you are an employee of any organization and you fall sick, your employer might pay you your full pay for a few weeks or months. By law, an employer must pay most employees statutory sick pay for up to 28 weeks, though this will probably be a lot less than your full earnings. After that, you would probably have to rely on state benefits.

However, some employers arrange group income protection insurance for their employees as an add-on perk of their job, which can pay out an income after the statutory sickness period. So check with your employer if you are entitled to get any such benefit as a part of your employment contract.

If you are self-employed, you won't have this option at all, and you’ll have to look for your own arrangements for insurance.

State benefits are not generous. You would probably see a substantial drop in your income if you were out of work for more than a few months because of illness or disability.

Insurance aims to put you back to the position you were in before you suffered a loss. But it does not allow you to make a profit out of your misfortune. So the maximum amount of income you can replace through insurance is broadly the after-tax earnings you have lost less an adjustment for State benefits you can claim. This usually translates into a maximum of, say 50% to 65% of your before-tax earnings.

Protection insurance

If you can't work because of illness or disability, income protection insurance (also called permanent health insurance) pays out a tax-free income.
Example of working out how much cover you need:

Nick is single and earns £26,000 a year before tax and other deductions. She estimates that, if she was ill for a long time, her budget would be affected as shown in the table below.

Nick's budget calculations in the event that she couldn't work	Her estimates
Income she would lose her take-home pay	£18,000
Deduct income she would gain approximate long-term incapacity benefit	£4,000
Deduct expenses Nick would save work-related costs, mortgage interest payments if covered by mortgage payment protection insurance	£3,000
Add extra expenses she would pay allowance for, say, cost of special equipment or treatment, cost of heating her home for more time	£2,000
EXTRA INCOME NEEDED	£13,000

Nick reckons she would need around £13,000 a year to maintain her lifestyle. This is half her before-tax pay of £26,000.

Nick also works out that as a perk of her job, her employer will pay her half a salary for 52 weeks after the statutory sick pay period of 28 weeks. She therefore arranges for her policy to pay out after 80 weeks of incapacity.

More details on how protection insurance works will be covered in the next article.

Link to previous article Pension Term Assurance (PTA) – Part II

Pension Term Assurance (PTA) – Part II

Yesterday, we concluded the article on Pension Term Assurance (PTA). Today, we’ll continue the PTA in more fine details this article.

Points to consider if you are switching to a PTA from a term assurance:

• Make sure you don't lose out by switching. Your current term assurance policy may include cover options which are not offered under the PTA policy you are considering.
• Remember that new PTA policies will not qualify for tax relief on the premium, and so will no longer have a tax advantage over ordinary term assurance policies.


Point to consider if you are switching to a term assurance from a PTA:

• Remember that PTA policies in force before 31 July 2007 will still get tax relief on the premiums. Switching to an ordinary term assurance will mean you lose this advantage.


Remember, if you are switching either way:

• Don't cancel your current policy until you are sure you have another policy in place - you could leave yourself uninsured.
If your health has deteriorated since taking out your existing policy, this may mean that the premiums for a new policy are more expensive and you might be better off not switching.

Previous article: Pension Term Assurance (PTA).

Pension Term Assurance (PTA)

Yesterday, we concluded the article on Cost of Term Insurance. Today, in this article, we’ll highlight the Pension Term Insurance or PTA, which is another good insurance plan to consider.

PTA is a type of term assurance which uses the rules for pension schemes to provide life cover. You do not have to pay any of your contributions towards an income at retirement and instead they can all be paid into life assurance cover.
Because PTA uses pension tax rules, you get tax relief or tax benefit or tax advantage on the premiums you pay into it. But it also means that the pension rules apply such as the limit on the pension contributions you can make every year, and the amount of pension pot you can accumulate over a lifetime without incurring a 40% tax charge. Therefore this type of term assurance may have an impact on any other pension arrangements you have or take out. Bear in mind PTA provides life cover - it pays out on your death and it will not give you a pension income.

What is it?

Stand-alone Pension Term Assurance (PTA) is term assurance which uses the rules for pension schemes to provide life cover. You do not have to pay any pension contributions and you can just take out life assurance cover.
But, following an announcement by the Chancellor in the March 2007 Budget you will not get tax relief on the premiums you pay on new stand-alone PTA policies. Existing PTA policies taken out before 14 December 2006 and which are in force by 31 July 2007 are not affected and will continue to enjoy tax relief on the premiums.
Stand-alone PTA pays out on your death. It will not give you an income in retirement. PTA won't necessarily be called pension term assurance; firms can use their own marketing names for it, so make sure you read the policy documents to make sure you understand what you're buying.

Tax relief

Given this change in the tax rules, stand-alone PTA will no longer have a tax advantage over ordinary term assurance products. So if you are considering PTA, you should look at ordinary term assurance too in deciding which product is cheapest and best meets your needs.


Policy options

If you have an existing policy where you can increase your cover by paying higher premiums, you will still get tax relief on those increased premiums.
However, if your policy doesn't include this option, you won't be able to increase cover and get tax relief on higher premiums.

Cost of Term Insurance

Continuing further from our previous article on Term Insurance, let’s discuss some more details of term insurance in this article –especially cost and types of term insurance.

What does the term insurance cost?
This depends on several factors, such as the amount of cover you want and the length of the term. Obviously, it's also based on the likelihood of your insurer having to pay out: if you're a smoker and do a dangerous job, you'll pay more than a non-smoking office worker. Term life cover also costs more for men because, on average, they don't live as long. Always compare what's covered by a policy, not just the price. Some might be cheaper than others, but they may not offer the same level of protection.

Whole-of-life insurance
Whole-of-life insurance pays out an agreed sum when you die, whenever that is.

What does the whole life insurance cost?
These policies will cost you more, partly because they will pay out whenever the event (death) happens, but also because of the various charges that come with them. The cost also depends on your lifestyle: if you're a smoker and do a dangerous job, you'll pay more than a non-smoking office worker. Life cover also costs more for men because, on average, they don't live as long as women. Always compare what's covered by a policy, not just the price. Some might be cheaper than others, but they may not offer the same level of protection.

In the next article, let’s talk about Pension term insurance in more details, and also about the tax benefit and limits that are imposed.
Link to previous article on Term Insurance

Term Insurance

Continuing further from the previous article on Life Insurance, let’s today discuss about the Term Insurance.
Term insurance
Term Insurance is the simplest and cheapest type of life insurance policies available in the market, and is known as term insurance because you have the option to choose how long you want to be covered for, say, 5, 10, 15, or 20 years (this duration is known as the term).

Term insurance only pays out if you die within the term you've agreed. If you live longer than the term, you get nothing. As a couple, you can also take out term cover in both your names, with the policy paying out if either of you die during the term.

Things to look out for while buying term insurance
While it is easy for anyone to think about term insurance, it is equally important that you understand what you are buying. Consider the following questions:

• What type of policy do you buy? For example,
1. family income benefit (a policy which pays out regular income, like every month, instead of a lump sum),
2. increasing policy (where cover and premium will rise over the years),
3. decreasing policy (where cover and premium will fall over the years),
4. renewable policies (which let you renew and extend the original term).

• Check for exclusions in the policy - in other words, there may be certain conditions and situations when the policy won't pay out. For example, most do not cover death due to alcohol or drug usage or suicide cases. You might not be covered while taking part in risky sports like car racing. If your health is poor when the policy starts, some causes of death might be excluded or you might be refused cover altogether.

• Premiums shown are usually fixed for the whole term. There are also contracts where premiums are reviewable after a certain period, usually five years.

• How flexible is the contract? Can you reduce or increase cover easily as your circumstances change? Are there extra charges for doing this? Does cover stop immediately if you miss a payment or is there a period of grace?

• By paying extra, you can usually include a waiver of premium. It pays the premiums if you can't work because of a long-term illness so that your cover is not interrupted.

• If you want to change insurer, check the level of premiums for the new contract before switching (premiums may have gone up because of older age or because you have developed medical conditions). Also check the new level of cover compared to the previous one. Different benefits may be available, and different exclusions may be applied – for example you may not be covered for medical conditions that have developed before the switch even if these were covered under the previous contract. If you do decide to change, make sure you do not cancel your original cover until you are fully covered by the new contract.

• The policy can be set up under trust. This means that in the event of death, proceeds of the policy are paid directly to dependants of your choice. Provided a trust is set up properly, there may be benefits to doing this. However, using a trust may not be suitable for everyone and because of the complexities we recommend you seek financial and legal advice.

In the next article, let’s discuss some more details about Term Insurance

Life insurance

Protecting your family and dependants

Today, let us begin with the introduction to Life Insurance.

We all know that life insurance is good and very useful, especially when we have to cover ourselves against the unfavourable events happening.

Life insurance is about providing some financial security for people who depend on you if you died. (So if you don't have a partner, spouse or civil partner, children, or other dependants, you may not need life cover.)

To make sure you buy the right amount of cover, with the right terms and conditions, you should consider getting some advice. The adviser assesses what your family would need, and shops around for the cover that suits you best.

Always answer questions as best you can and disclose any existing medical conditions when asked. If you don't give the full facts, you could invalidate your policy and the insurance company won't pay out.

There are two main types of life insurance: term insurance and whole-of-life insurance.

Term insurance (also called term assurance) pays out only if you die within a certain term, and whole-of-life insurance pays out whenever you die. Some whole-of-life policies also contain an investment element to them, but such investment-type policies cost a lot more than protection-only insurance.

If you want investments, consider the full range of products (not just life insurance) which might meet your circumstances and needs.

Tomorrow, in the next articles, let's discuss in detail about the term and whole life insurance!

Payment Protection Insurance - More information – Part II

Continuing further from our previous article on PPI - more information, here are some common questions that can be listed as FAQ’s for PPI or Payment Protection Insurance.

What's in the small print?

Like all insurance, Payment Protection Insurance or PPI policies will generally include a number of exclusions or conditions that will prevent you from claiming on the policy. Make sure you understand which illnesses are not covered – see below. Also, you may not be eligible to take out a policy in the first place – say, if you:

-are under 18 or over 65;
-work less than 16 hours a week;
-are employed on a temporary or contract basis;
-are aware you may become unemployed;
-have an existing illness; or
-have stress or backache.

If in any doubt, ask the salesperson to explain any parts of the policy that you may not be able to claim on (the exclusions and eligibility conditions). Be sure you understand the exclusions before you buy the insurance.

I have an existing medical condition. Will I be able to take out PPI?

Yes, but you will not typically be able to make a claim for a medical condition you were aware – or should have been aware – existed at the time you took out the policy, or sometimes earlier. You would normally be able to claim for other illnesses that occur after you take out the policy. Make sure you read the exclusions to the policy.

Do I have to take out PPI and what would happen if I didn't?

No. If the firm insists on PPI cover to get the loan, you should consider whether you really want to take the loan with that lender.
Think about the cost of PPI and the amount that will be paid out if you make a claim on the policy. Check whether payments from a PPI policy would affect the benefits that could be paid from any other protection insurance that you already have.

If you don't take out PPI think about how you would pay the loan, mortgage or credit/store card payments if you were sick or had an accident and were unable to work or became unemployed.

Can I cancel the policy if I change my mind?

You can cancel the policy within either 14 or 30 days of taking it out, depending on the terms of the policy. But the firm can charge you for the time you were covered and the cost of selling the policy. Read the keyfacts Policy Summary, which explains the cancellation period.
If you have a single premium policy and you cancel after this initial cancellation period, you will usually find the refund you get is not in proportion to the remaining policy term. So you could get less back than you might expect.
Check with the salesperson or in the policy documents what refund you would get and how it would be calculated.

Will I still have to pay for PPI cover if I terminate a car loan?

On some occasions you may owe money for the PPI you bought to cover a loan, even if you repay the loan early. For example, this would apply if you take out a loan to pay for PPI at the same time as taking out a hire purchase (HP) agreement – or loan – to buy a car. If you terminate the HP agreement for the car early you may find you still owe money on the PPI.
I bought PPI with my loan or credit when I applied online, but I didn't ask for it – what should I do?Some firms offer PPI to customers when they apply for their loan or credit online – and this is sometimes selected by default on the forms. If you bought PPI in this way but didn't ask for it you should follow the complaints process below.

What should I do if I have a complaint?

If you have a complaint about the PPI you have been sold, you should first complain to the firm that sold you the policy, to give them a chance to put things right. If your complaint is about a claim, you should complain to the insurance company. If you're not happy with the outcome you may be able to take the complaint to the Financial Ombudsman Service For more information see A guide to Payment Protection Insurance on the Association of British Insurers' website.

Payment Protection Insurance - More information – Part I

Continuing further from our previous article on PPI, here are some common questions that can be listed as FAQ’s for PPI or Payment Protection Insurance.

What does PPI insurance cover?

What the insurance covers will vary depending on the sort of repayments the policy is designed to protect, and on the terms of the particular policy.

The following benefits are typical for different types of PPI cover:

Mortgage – The insurance covers your monthly mortgage repayments for a set period of time. The maximum number of monthly repayments that the insurance company will make is usually 12, but it can sometimes be 24. This means that after this period you will have to pay your monthly mortgage repayments yourself.
Credit and store cards – The insurance will generally pay off a percentage of your outstanding balance or the minimum payment each month for up to a year. Check which option is being offered. This means that you may still have to pay any balance left after this time.

The insurance typically only provides cover for the amount you owe when you make a claim, and not any balance you build up after this.
Loans – The insurance will cover your monthly repayments for the loan – generally for 12 or 24 months. After this period you will have to pay your monthly loan repayments yourself.

If the insurance for any of these products contains life insurance, then the cover will generally pay off the balance of the debt covered if you die. If the claim is for disability, the monthly repayments may be paid to the end of the life of the loan.

How will I know what I'm covered for?
You should read the Policy Summary and policy document that come with any policy you take out. We require firms to give you a Policy Summary with this sign keyfacts document.

This sets out, amongst other things, the main features and benefits of the policy as well as any significant or unusual exclusions and how long the cover lasts. If unclear ask the salesperson to go through it with you and make sure you're happy before you take it out.

How much will it cost?
Remember interest rates and APRs for loans, mortgages and credit/store cards do not usually include the cost of the PPI policy, so comparing interest rates on their own will not be helpful if you are taking out PPI.
The salesperson must tell you how much the insurance will cost you separately from the costs of the loan. You can pay by a single or regular premium. The single premium can be added to your loan, thereby increasing what you borrow. A regular premium is a set amount you pay each month.
The salesperson is likely to quote you a monthly figure for the PPI whether they're quoting for a single or regular premium. If you take out a single premium bear in mind that, as it's normally added to your loan, you're being charged interest on that as well. This example shows how much more a single premium may cost.

Loan	£2,000
Loan interest	200
Total loan cost	£2,200
PPI premium	£250
PPI interest	30
Total PPI price	£280
Total cost of loan with PPI	£2,480
Total cost of loan without PPI	£2,200

A regular premium may be cheaper because you will not be charged interest.
If in doubt, ask the salesperson to clarify what sort of premium they are quoting for.

Payment Protection Insurance-part II

This is part II of the article Payment protection insurance

What should you do while planning to take Payment Protection Insurance?

• Think carefully about the risks you could face while paying back a loan, mortgage or credit/store card and whether taking out PPI would be to your advantage. If you had an accident that stopped you from working, would you have enough savings to be able to continue paying off the loan?

• Consider whether you have other insurance which already covers you (for example through your employer), or whether other types of protection insurance may be more appropriate.

• Don't be pressurised into buying it - you don't usually have to take out PPI to get a loan and you don't have to buy it from the same place you get your loan from.

• Check online forms when applying for loan or credit online. Sometimes PPI is selected by default and you will need to change this option if you don't want to buy it. You should also print out or keep copies of completed forms in case you need to complain or make a claim in the future.

• Find out whether the firm is giving you advice, if not, consider whether you need advice. Getting advice means that the firm should recommend a PPI or other policy that meets your needs.

• Find out whether the policy is a single or regular premium. If you buy a single premium policy you pay a lump sum of 3-5 years' worth of premiums in advance. This amount is added to the sum you borrow and attracts interest, so you'll be paying more over the long run.

• Think about what you would do when the claims payments stop and you are still unable to work. How would you pay the rest of your loan?

• Check to see what you will be covered for and what won't be covered – for example any exclusions relating to the nature of your employment or your medical history.

• Check what you will get back if you cancel the policy or repay the loan early.

Ask the salesperson to explain the terms and conditions of the policy and make sure you read the keyfacts Policy Summary document – especially read the exclusions carefully.

In the next article, let’s cover some fine details and more information on Payment Protection Insurance

Payment protection insurance

Yesterday, in the previous article, we talked about the special case of Mortgage payment protection insurance.

Today, let us focus on the wider topic of Payment Protection Insurance Scheme.
What is it?
Payment protection insurance, or PPI, is insurance that will pay out a sum of money to help you cover your monthly repayments on mortgages, loans, credit/store cards or catalogue payments if you are unable to work. This could be because you have an accident or sickness, or become unemployed through no fault of your own.
This means that the insurance company will pay the monthly repayments (or a percentage of them) on your behalf for a fixed period of time if you become unable to work. It is sometimes known as ASU (accident, sickness and unemployment) insurance, Account Cover or Payment Cover.
PPI can provide worthwhile cover against unexpected changes in your personal circumstances, but bear in mind its limitations and exclusions.


Where might you get it from?
You're likely to be offered PPI by the company when you take out a loan or credit agreement, but you don't have to buy it from them. You can buy it yourself separately from insurance brokers, including over the internet. Shop around to get the best deal for you.
PPI is useful, but you may not always want it or be able to claim on it when you need to.


What are the main features?
• PPI is almost always optional – you should not normally be refused a loan if you decide not to buy it.
• PPI only pays out for a set period of time, generally either 12 or 24 months.
• To claim on the unemployment part of the policy typically you must have been employed continuously by the same company for the last 12 months on a permanent contract.
• You may not be able to make a claim for an illness you already have or have had before. Make sure you check this before you take out the policy.
• Stress or back complaints, and possibly other conditions, may not be covered, even if you can't work because of them. Again, it's worth checking before you take out the policy.
• You have a legal right to cancel the policy and get a refund within 14 or 30 days of taking it out.
Tomorrow, let’s talk about how and whether you should take this insurance.

Mortgage payment protection insurance

Continuing further from the previous article about Critical Illness, let us today talk about the insurance for mortgage payment protection or commonly known as Mortgage payment protection insurance.

Mortgage payment protection (also called accident, sickness and unemployment insurance) is an excellent insurance scheme as it takes care of the undesirable situations when your income stops. A typical policy will start to pay your mortgage repayments one month after your income stops due to redundancy or job loss, accident or illness, and continues to pay for the next 12 months. This insurance cover can be very beneficial in case you are in a bit dodgy kind of a job, where the chances of redundancy are quite high. Hence, if you are made redundant by your employer, or you are unable to get your income due to sickness or accident, then this mortgage payment protection plan will take care of you.

But the first question: Do you really need Mortgage payment protection insurance?

You don't have to have this type of cover at all (unless it's a condition of your loan) and you certainly don't have to buy it from your own lender, so shop around for the best deal for you. But this insurance is very suited if you have taken a loan or mortgage and are planning to repay it back from your salary or income. In case you loose your job or fall sick such that you are unable to work, then your loan or mortgage payment will not be paid on time, and you will end up in a financial distressed situation.

If you take the Mortgage payment protection insurance, then it will make sure that atleast your payments for your mortgage of loans are honored on time and you don’t loose your house due to failure in making payments. Hence, secure this Mortgage payment protection insurance if you are a salaried person and have income mainly from your salary, along with the commitment to fulfill your loan or mortgage obligation.

Hence this insurance policy or scheme is also called Mortgage payment protection insurance scheme.

To explain in detail, Mortgage payment protection insurance scheme is a special type of insurance policy which falls under a more general insurance cover called Payment Protection Insurance. Where Mortgage Payment Protection scheme is specific to covering the mortgage related payments, the general Payment Protection insurance scheme is there to cover all kinds of payments (including mortgage payments), in case you falls sick or meet an accident and are unable to get your salary or income.

Let’s talk about the general Payment Protection Insurance Scheme tomorrow in a next article in detail.

Critical illness cover - Part I

What is it?
Critical illness cover or commonly abbreviated as CIC pays out a fixed lump sum amount of money if you are diagnosed with certain illnesses which fall under the critical illness category.. The illnesses covered will be specified in the policy along with any exclusions, at the time when your are buying this policy. These exclusions differ from one insurer to the other, so please make sure you know what you are paying for. CIC policies generally only pay out only once in a lump sum amount, so they are not a replacement for income.

Who should buy it?
You have taken a mortgage loan, and have a financial commitment to repay the loan for the coming few years. Now you are afraid that you may get a critical illness due to which you may not be able to work and get your income. Then how will you manage to repay your mortgage loan? That’s when the CIC policy insurance helps. Many people buy CIC when they take on a major commitment such as a mortgage. This is something you must discuss with a mortgage adviser.
Even otherwise if you don’t have a financial obligation, you can buy CIC insurance policy:
• through a financial adviser, who advises on CIC, taking account of your wider financial circumstances; or
• directly from insurance companies over the telephone or internet.
Not all firms can and are eligible to give you advice about whether CIC is suitable for an individual. They should clearly tell you whether they will be offering advisory services and recommending a policy, or giving you information only. If they only give information, you will need to consider the information they give you and make your own decision as to whether the product is right for your requirements.


What are the main features?
Before you take out cover, here are some things to consider:
• Critical illness cover pays you a lump sum if you are identified as a patient suffering from one of the illnesses specified and covered in the policy terms.
• Policy summaries will often have a list of sicknesses covered, but this is only a guide and full details will be in the policy document. This will also set out the eligibility criteria that have to be met before the insurer will pay a claim.
• As an example, in the case of deadly disease like cancer, not all kinds of cancers or all stages of the cancer are covered. For heart attacks, the insurer will need to know the pre-existing medical proof of the severity of the heart condition before paying a claim.
• CIC does not cover simply any sickness that affects your ability to work – it is specific about which illnesses are covered. Usually, the more sickness or diseases you want to be covered, the more costly the policy will become.
• Some insurers exclude all pre–existing sickness conditions but others will decide on the basis of your personal medical history.
• CIC differs to other types of protection insurance such as income protection or payment protection, so make sure you understand what it does and whether it is right for you.
• Before you buy the insurance cover, the firm should give you either a Policy Summary or Key Features document. This will set out the key features and benefits, as well as any significant or unusual exclusions. If you have any queries about these you should ask the salesperson to explain the cover in more detail.
• Many insurers now provide a plain English guide to the illnesses covered. Ask the salesperson if they have one that explains the policy they have recommended.
• If the insurer imposes any other conditions, perhaps because of your own or family medical history, you should be told what they are before you take out the policy.
• Detailed policy terms and conditions will be provided in the policy document the insurer will send you after you take out the cover – make sure you read it so that you know what you're covered for.

Continue to Part II of this article

Critical illness cover – Part II

This is part II of the article, Critical illness cover – Part I, Please read the first part of the article before continuing with this part.

If you've decided to take CIC:
• It's essential that you give full, honest answers to questions you are asked about both your own and family medical history. Giving incomplete or wrong information could invalidate your policy and any claim you make on it.
• If you are not sure, it is better to mention things. Otherwise the policy may not pay out when you need it.
• Many insurers will allow you to send medical information directly to their Medical Officer, so if you do not want to discuss personal or sensitive information with the sales adviser, ask about this option.
• Bear in mind that the premium the salesperson quotes to you is only an estimate. The insurer will confirm the actual premium, and the terms, after it has considered your medical history.
• Make sure you understand what the policy covers, when it will pay out and when it will not.
• Read the documents given to you and ask questions if you don't understand anything.
• Remember CIC only pays a lump sum. If you want insurance to cover lost income or your mortgage repayments, ask if there are other types of insurance that might be more suitable for your circumstances.
• Most Important point, YOU AND ONLY YOU should decide what is right for you and buy the cover accordingly.


Other important information
I already have CIC but want to change my mortgage and increase the cover. Should I cancel my existing policy and take out a new one?
You might find that by replacing a policy you lose some of the benefits if you have developed any illnesses since you took out the first policy. Pre–existing conditions may not be covered under the new policy. You may be able to get cheaper cover if you switch to another company but the cover might not be as good.
So think very carefully before you replace or switch your policy.
Some policies allow you to increase your cover – particularly after lifestyle changes such as marriage, moving home or having children. Ask your insurance company or financial adviser for information.
If you cannot increase the cover under your existing policy you could consider taking out a new policy just to 'top up' your existing cover.
Can I cancel the policy if I change my mind or I'm not happy with cover it provides?
You can cancel within 30 days of taking out the policy and get your money back – provided you have not made a claim. After that, you can still cancel the policy at any time under most contracts, but you may not be entitled to a refund of the premiums you have paid. Your cancellation rights should also be set out in the keyfacts document.

Insurance for Protecting income or borrowing

Once you take any kind of mortgage or loan, it is very very important that you make all the repayments in full, both for interest and capital, and the repayments should be made on time. If you are unable to do so you could lose your collateral or security like your home if it's your mortgage or your loan is secured on it. Failure to make payments will also dampen your credit rating severely – which will have long lasting consequences for you financially.

Despite you making all the legal obligations and commitments, sometimes however, the unexpected may occur. For example, you might be fired from your job through redundancy, or find yourself unable to work due to accident or long–lasting sickness. By law, an employer must pay most employees statutory sick pay for up to 28 weeks though this will probably be a lot less than full earnings. Hence, you may not be able to meet your financial obligations. After that, you would probably have to fall back on government supported benefits. These are very limited and means-tested which may mean you won't qualify. Situation will be worse if you are self-employed or running your own business, you have no employer to help, so you would have to turn to the State or government.

The above mentioned situations are the ones when insurance to protect you or your family's income or borrowing can be very useful. Here is a list that quotes some examples below of insurance products and why you might find them useful:

Critical Illness:
The Critical Illness Insurance cover is for covering critical illness. It pays out a lump sum if you're diagnosed with a critical illness, such as cancer, a stroke, MS, a major organ transplant, coronary artery bypass, heart attack and kidney failure. You can use the payout from this insurance policy to pay out for medical treatment, pay off your mortgage, any other kind of loan or anything else. Please note that you get money for your illness, which will be agreed upon when you buy your insurance. There is no guarantee that this money will be able to cover up for your financial obligations.
You must read your insurer's terms carefully, not just for the range of illnesses they cover but also their type. For example, while a heart attack may be covered, a cardiac condition such as angina may not, also not all types and stages of cancer are covered. Hence, be clear about what the insurance covers and what it does not cover. Also get a rough estimate of how much you will be eligible to get in case you are caught with critical illness.
Generally, for a critical illness claim to be successful, you are normally required to survive a month following the diagnosis. This is usually done so that the people seeking insurance don’t hide any critical illness symptoms they may have while buying insurance cover.

In the next article, let’s discuss another kind of protection plan. Please visit the next article.