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					                                                                             Advice Guide 2:
                                                                             Personal Insurance




                                    Personal Insurance
Life Insurance and Critical Illness Cover

There are different types of mortgage protection and life insurance (or assurance) available.
Some provide a payment only in the event of your death, whereas those with critical
illness cover included will provide the lump sum if you are diagnosed with a qualifying
medical condition.

Level term life insurance
Provides a fixed lump sum payment should you die within a specified period of time.

How it works:
   • You select the amount of cover you would like and the period that you want the cover to
      run for.

    • If you die during the term of the policy, your insurer will pay the fixed amount you are
      covered for.

    • If you set up a joint policy (a single policy to cover two people), the amount of cover is
      paid out upon the first person’s death.

    • The policy expires when a claim has been paid.

    • The policy has no cash-in value at any time.

Level term life insurance with critical illness
Provides a fixed lump sum payment should you die or suffer a critical illness within a specified
period of time.
How it works:
   • You select the amount of cover you would like and the period that you want the cover
      to run for.

    • If you die or are diagnosed with a critical illness during the term of the policy, your
      insurer will pay the fixed amount you are covered for.

    • The type of illnesses typically covered include heart attack, stroke, cancer and multiple
      sclerosis, but the precise cover and exclusions may vary by insurer and the level of
      cover.

    • The full list of specific qualifying illnesses is detailed by insurers in their key facts
      document, which is available upon request.

    • If you set up a joint policy (a single policy to cover two people), the amount of cover
      is paid out upon the first claim.

    • The policy expires when a claim has been paid.

    • The policy has no cash-in value at any time.



          +44(0)845 356 1000                                     www.youngfinance.co.uk
                                                                            Advice Guide 2:
                                                                            Personal Insurance




Mortgage protection cover / decreasing term insurance
Provides a decreasing lump sum payment to cover your outstanding mortgage amount should you
die within a specified period of time.

How it works:
   • You select the amount of cover you would like and the period that you want the cover
      to run for.

   • The amount of cover reduces each month during the policy term and is calculated to
     equal the capital outstanding under a normal repayment mortgage.

   • If you die during the term of the policy, your insurer will pay the calculated amount of
     cover at that time.

   • If you set up a joint policy (a single policy to cover two people), the amount of cover
     is paid out upon the first person’s death.

   • The policy expires when a claim has been paid.

   • The policy has no cash-in value at any time.

Mortgage protection cover / decreasing term insurance with critical illness
Provides a decreasing lump sum payment to cover your outstanding mortgage amount should you
die or suffer a critical illness within a specified period of time.

How it works:
   • You select the amount of cover you would like and the period that you want the cover
      to run for.

   • The amount of cover reduces each month during the policy term and is calculated to
     equal the capital outstanding under a normal repayment mortgage.

   • If you die or are diagnosed with a critical illness during the term of the policy, your
     insurer will pay the calculated amount of cover at that time.

   • The type of illnesses typically covered include heart attack, stroke, cancer and multiple
     sclerosis, but the precise cover and exclusions may vary by insurer and the level of
     cover.

   • The full list of specific qualifying illnesses is detailed by insurers in their key facts
     document, which is available upon request.

   • If you set up a joint policy (a single policy to cover two people), the amount of cover
     is paid out on the first claim.

   • The policy expires when a claim has been paid.

   • The policy has no cash-in value at any time.

         +44(0)845 356 1000                                     www.youngfinance.co.uk
                                                                            Advice Guide 2:
                                                                            Personal Insurance




Family Income Protection
This is a low cost term assurance policy which pays a set income in the event of the death of the
policy holder.

How it works:
   • The tax free income payment is made to a future specified ‘end date’ agreed when the
      policy is first taken out.

    • It is often used to replace income of the main earner in the event of their death until
      the last dependent child has reached 18 years of age.

    • The income payment can be paid annually or as a lump sum, depending on the
      specifics of the policy.

    • Family income protection can be surprisingly cheap as the policy is on a ‘decreasing
      basis’ - the amount that the insurer has to pay out diminishes the closer the policy
      gets to its end date.

Income Protection & Mortgage Payment Cover

Income Protection
Sometime referred to as disability insurance, permanent health insurance or income replacement,
income protection provides a regular tax free income if you are unable to work due to accident or
sickness. It is available both to the employed and self employed.

How it works:
   • The policy typically pays out around 50% of your net annual income.

    • Payments are typically paid on a monthly basis and can be level or inflation linked,
      depending on the policy.

    • There is commonly a ‘waiting’ or ‘deferred’ period before payments kick in; this is set
      at the outset.

    • Typically, the longer the deferred period, the cheaper the policy.

    • The cost of the policy is determined by your age, occupation, state of health and level
      of income protected.

    • Once they begin, payments continue until the policy expires or the insured person
      dies or returns to work.

    • In many cases, a policy will have a fixed term – usually to the standard retirement
      age – after which payments will cease.

    • As a term assurance policy, income protection has no investment element and no
      cash-in value at any time.

          +44(0)845 356 1000                                    www.youngfinance.co.uk
                                                                         Advice Guide 2:
                                                                         Personal Insurance




Mortgage Payment Protection
Sometimes referred to as ASU (accident, sickness, unemployment) or MPPI (Mortgage Payment
Protection Insurance), Mortgage Payment Protection protects your mortgage payments if you are
unable to work for a period of 12-24 months.


How it works:
   • Payments typically start when the policy holder has been unable to work for 30 or 60
      days (depending on the specifics of the policy).

   • Payments typically continue for between 6 months and 2 years, or until the policy
     holder returns to work.

    • Most policies do not provide unemployment cover for casual workers, part-time
      workers or the unemployed.




         +44(0)845 356 1000                                  www.youngfinance.co.uk

				
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