Insurances/ Protection

1. Why you should have protection?
If you had a machine that printed money, would you insure it in case it was damaged or stopped working? Of course you would! If you have a family, a good lifestyle, or financial commitments, then life would become much harder if your income was to stop through death or long term illness. By using protection policies such as life cover, income protection, or critical illness cover you can protect your family, lifestyle and make sure all financial commitments (for example a mortgage) are paid.
2. Where I should my insurance arranged? Who has the best service?
The internet makes it easy to look for information on any subject, and many simple financial products such as credit cards, bank accounts and loans are sold via the internet. But for important products such a protection, it is better to get expert advice to ensure you have the most suitable products giving best value. By using an Independent Financial Adviser (IFA) you have access to an expert who can advise you on the best course of action for your specific needs and who can choose from products from the “whole of the market”. Banks also offer protection, but often it is only from one or a narrow range of companies. IFA’s are different as they can choose from every company.
To find an IFA in your area use http://www.unbiased.co.uk/
3. How to get insurance quotation?
Protection/insurance quotes are available on the internet via websites such as moneysupermarket.com, but unless you are very sure about what protection you need and want, it is always better to seek independent financial advice.
4. When and how I can insure my children?
It is unlikely you will be able to insure your children for death until they are aged 16. However you can insure your children for “Critical Illness” through a Critical Illness policy on yourself.
5. About what I should be aware before I sign my insurance agreement?
Make sure you understand what you are and are not covered for, and that you are happy with the premium you will be paying. You must be happy with the cover provided and that you feel it represents good value and “peace of mind”. You should be aware of any exclusions of cover (particularly for “Critical Illness” and “Income Protection”) as there are some circumstances when the benefit will not be paid out.
6. What are types of insurances?
There re many types but the most common are:
Life cover: pays a lump sum benefit if you die (eg for your family or a mortgage)
Family Income Benefit: pays a regular tax free income if you die
Critical Illness: pays a lump sum if you are diagnosed with a specified critical illness (eg cancer, heart attack, stroke)
Permanent Health Insurance (PHI): pays an income if you are unable to work through illness
7. Why do I need protection? Why is so important to have this when you are a    foreigner?
It is common for many workers (especially contract or temporary) to have no life insurance or sick pay provided for by their employers should you be unable to work due to illness or injury. If this is the case then the responsibility lies with you to protect yourself against a financial disaster.
8. It is legally required to have life protection?
No. There is no legal requirement to have life cover, or any other kind of protection. But it is highly recommended!
9. What is health protection and critical illness? Can I insure my children as well?
“Permanent Health Protection” (PHI) is similar to sick pay when you are off work. It will pay up to 60% of your income after a specified period (eg 4 weeks) so that you can survive financially should you be unable to work through illness or injury. It is especially important if your employer provides no sick pay.
“Critical Illness” protects you if you have a serious illness, and will pay out a lump sum if you are diagnosed. It must be an illness included on your chosen company’s critical illness list, some of these include:

•           Alzheimer's disease
•           Bacterial Meningitis
•           Benign brain tumour
•           Blindness
•           Cancer
•           Cardiomyopathy
•           Coma
•           Coronary artery by-pass grafts
•           Creutzfeldt-Jakob disease
•           Deafness 
•           Heart attack
•           Heart valve replacement or repair
•           HIV infection
•           Kidney failure
•           Liver failure
•           Loss of hands or feet
•           Loss of speech
•           Major organ transplant
•           Motor neurone disease
•           Multiple sclerosis
•           Open heart surgery
•           Paralysis of a limb
•           Parkinson's disease
•           Prostate cancer
•           Severe lung disease
•           Stroke
•           Terminal illness
•           Third degree burns
•           Traumatic head injury
•           Permanent total disability
You cannot insure children for these but you can cover them for a reduced Critical Illness cover (usually at no extra cost) via your own policy.
10. What is Mortgage Payment Protection Insurance? (MPPI)
This is an optional mortgage payment protection insurance. It is designed to protect your monthly mortgage repayments, for up to 12 months for any one claim, should you be unable to work due to an accident, sickness, unemployment, or if you give up work to become a carer. After 30 days of unemployment, disability or having given up work to become a carer, you will be receive an income which will pay your mortgage. The maximum benefit allowed is usually 125% of your mortgage payment. The unemployment cover depends on your type of working contract, and any unemployment must be involuntary.
11. Types of Life cover for a mortgage (standard and decreasing level) what are pluses and minuses?
If you have a repayment mortgage then you are gradually reducing the amount you owe for your mortgage. Therefore you can have a life cover which reduces in line with your mortgage, this is known as “decreasing term”. An example is a cover which starts at £200,000 but gradually reduces over time (eg 25 year mortgage), until the last day of the cover when the level of cover will be very low and almost zero to reflect that you have nearly repaid the mortgage and owe almost zero.
Alternatively you can have a “level term” which means the cover remains the same for the whole term. An example would be a cover which starts at £200,000 and over time (eg 25 year mortgage) the cover is still £200,000, even though you may now owe very little on your mortgage.
“Level Term” provides better long term cover but is more expensive than “decreasing term” and it usually depends on how much you are happy to pay.
12. What are changing premiums means?(reviewable premiums)
Reviewable premiums mean that the insurance company can increase your premium at any time if they want to.
13. What are guaranteed premium means?
Alternatively you can have a guaranteed premium which means the insurance company can never increase your premium.
14. What is rating or loading?
When you apply for any kind of protection, you will be asked medical questions regarding your health history and your family’s. The insurance company will then “underwrite” your application to assess the risk or likelihood of you making a claim. If the insurance company feel you are at a greater than normal risk (eg if you have medical problems) they can “load” your premium and ask you to pay more to reflect the increased risk you represent. The more risk you represent the higher the loading. If the risk is too great then the insurance company can decline your application entirely.
15. What is indexation?
“Indexation” means that your policy will increase each year in line with inflation. This can be important as protection can run for decades, and what may seem like a large amount of money today, may not be a large amount of money in 25 years! If you select to have “indexation” then your premium will increase slightly each year to reflect the slightly increased cover.
16. What is deferred period?
This is the period you must wait before receiving any benefits should you make a claim. It is most common for “Permanent Health Insurance” (PHI), where you select a “deferred period” before you will receive your income should you be ill or injured. For example, if your employer will pay you for 6 months, then you could select a deferred period of 6 months so that your protection kicks in after your employer stops paying you.
Alternatively if your employer will pay you nothing, you could have a very short deferred period of 4 weeks, so that you receive your income sooner.
The shorter your deferred period, the more expensive your premium will be.
Marlena Weber talks with  Andy McGowan DipFA Cert PFS MIFS Candour Independent Financial Advisers Ltd and Sebastianem Kedziora Kupdom The Caesar and Howie Group”