What you need to know about insurance
Protection
Protecting your persona, your family, and your assets are crucial, especially if you have a family or running a business. Below are the types of insurance policies and covers you might need to think about investing on.
Life Insurance
What Is Life Insurance?
A life insurance policy is a coverage type you agree with an insurance company. You will need to pay a premium, and the company will provide your family or beneficiaries with a sum in the case of your death – known as a death benefit.
What Are the Different Types of Life Insurance Available?
Term assurance
This is one of the most basic types of life insurance and is called term life insurance, where you choose the period you want to cover and the amount you want to be insured for. If you pass away within the term, the policy pays your beneficiaries. If not, the policy does not pay out, nor are the premiums returned.
There are three types of term assurance: level-term, decreasing-term and increasing-term insurance.
- Level term: pays out a lump sum if you die within the specified term. The amount you’re covered for remains at the same level throughout the term of the policy.
- Decreasing term: the amount you’re covered for decreases over the term of the policy. These policies are beneficial to cover debt that reduces over time, such as a repayment mortgage.
- Increasing term: the amount you’re covered for increases over the term of the policy, to keep up with the cost of inflation. This is often used to protect loans which don’t decrease like a standard repayment mortgage e.g. shared ownership.
Family income benefit policies
Family income benefit insurance is a type of decreasing term policy. Rather than a lump sum it pays a regular monthly income to your beneficiaries if you pass away until the policy’s expiry date.
Whole of life policies
Whole of life policies are ongoing policies that pay out when you die, whenever that is. Unfortunately it is one of the guaranteed things in life that at some point you will die (and therefore the policy will have to pay out), these policies are more expensive than term assurance policies, which only pay out if you die within a certain timeframe.
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Do I Need Life Insurance?
Life insurance is an essential policy to consider, especially if some members of your family, such as a partner or kids, depending on your income. In this way, they will be protected in the case of your death.
How Much Does Life Insurance Cost?
Depending on your health, age, job, and risks you usually run, your life insurance can vary. The average monthly premium for a life insurance policy in the UK is £15.85.
What Are the Determining Factors?
Insurers consider several factors when calculating your life insurance monthly cost. These factors include:
- Age
- Lifestyle
- Medical history and health
- Living situation
- Gender
- Job and career
What Do You Need to Think Before You Take Out Life Insurance?
Before contacting an insurer, it is essential to determine how much coverage you and your family need. You should also consider your current situation and check whether you can afford the monthly payment.
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Critical Illness
Many things can mean that your credit rating is low. Some of them are relatively obvious, whereas others might not be things that you even think would impact your credit rating and in turn your chances of being approved for future borrowing.
The first one is your payment history. This is one of the critical parts of a credit score. Every time you make a payment on a credit account, on time and in total, that is one big tick against your name. However, every time you miss a payment, make a partial payment or are late making the payment, you will see your credit rating decrease.
Next, your credit check will also look at how much money you owe. It is more than just a straightforward, “you owe this amount on these accounts” credit check agencies will also want to consider your credit utilisation ratio.
They will want to look at your total credit and how much credit you have already taken out. This will show them how reliant you are on your credit facilities and how likely they will build up again.
How long you have had credit accounts will also play a part in your credit score. The longer you have had your credit accounts for will higher your credit score. This is because it shows that you have been able to manage credit over the years and that you are more likely to know what it takes to look after your borrowing in the future.
A credit score will also see the types of credit you have taken out. Those who have high credit scores will usually have various credit accounts in their names. Of course, you may worry that this shows you in a negative light and that you are borrowing more than you can afford, but, in actual fact, it shows them that you can balance your borrowing across a wealth of different areas and types of account.
Finally, a credit score will also look at the new credit accounts you have opened and how many inquiries you have made against your name. If you have too many bills or have made too many requests for credit in recent times, this will negatively impact your credit score and lessen your chances of getting a mortgage.
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Critical Illness
What Is a Critical Illness Cover?
Critical illness insurance cover, also known as critical illness insurance, is a contract you make with your insurer. In exchange for payments, the insurer will pay out a lump sum to your family or beneficiary in case of your severe or critical illness.
What Does Critical Illness Insurance Not Cover?
The critical illness cover is designed to cover a limited range of critical illnesses, which are specified on your insurance plan. While the cost of this insurance is affordable not all critical diseases are effectively covered, so be sure to check your policy information carefully.
Do I Need Critical Illness Insurance?
If your family primarily relies on your income, you might need to consider investing in a critical illness insurance plan. This will cover you all in the case of illness and reimburse your family. However, it is recommendable to check whether life or health insurance could be a more convenient option.
What Are The Most Common Critical Illnesses?
- Acquired brain injury
- Aortic surgery
- Aplastic anaemia
- Benign brain tumour
- Bacterial meningitis
- Blindness
- Cancer
- Coma
- Coronary artery bypass surgery
- Deafness
- Dementia, including Alzheimer’s disease
- Heart attack
- Heart valve replacement or repair
- Kidney failure
- Loss of independent existence (LOIE)
- Loss of limbs
- Loss of speech
- Major organ transplant
- Major organ failure on a waiting list
- Motor neuron disease
- Multiple sclerosis
- Occupational HIV infection
- Paralysis
- Parkinson’s disease and specified atypical parkinsonian disorders
- Severe burns
- Strokes
Cover for critical illnesses and conditions can vary per insurance provider and some of these may not be covered by some providers.
How Much Does Critical Illness Insurance Cost?
The cost of your critical injury insurance policy will vary and can be adjusted depending on what your goals and needs are. However, generally, the monthly payment varies depending on the sum assured length of the policy, premium types, and type of cover.
What Do You Need to Think About Before You Take Out Critical Illness Insurance?
Critical illness insurance is an important cover to have if your family relies on your income. However, it will not cover several other illnesses and health conditions that can still impact your ability to work and earn. Making clear with your insurer what are the situations covered and what is not is crucial.
Income Protection
What Is an Income Protection Insurance Cover?
The income protection cover is a policy designed to replace part of your income if you are ill, disable, or unable to work. The cover will pay out regularly until you can start to work again or you can retire. It will also stop in the case of your death or end of the policy.
After you have started the insurance policy, there is a waiting period you have to allow for before the payments can start. You can set the waiting period to end at the end of your sick pay or other insurance policy. However, the longer the waiting period is, the lower your monthly premium will be.
Do I Need Income Protection Insurance?
Income protection insurance covers the majority of illnesses that will prevent you from working. So, both long-term and short-term health conditions fall under the insurance, and you can claim as many times as you need. These features make it perfect to be able to count on a form of income for your family – in case you can’t work and provide for them.
How Much Does Income Protection Insurance Cost?
The average income protection insurance monthly payments in the UK are £18.35 – which will guarantee a monthly payout of 65% of the income you would perceive normally.
What Do You Need to Think About Before You Take Out Critical Illness Insurance?
The monthly payments might vary depending on your health conditions, health, and lifestyle. Moreover, since it will start covering you after your sick pay and other policies have ended, it might only be efficient if you are affected by a long-lasting health condition. Ultimately, considering the other covers you have might be essential.
Buildings and Contents
What Is Home Insurance?
Home and homeowners insurance is a policy that is designed to cover the losses and damages that might affect the property’s value. It covers furnishings and the majority of other assets in your home. Also, it covers accidents that happened in the property.
What Is Covered by Home and Contents Insurance?
Depending on your policy, the insurance will cover the losses caused by damages to your property or residence. It also protects the items inside the house and the ones that have been taken out of it – on holiday, for example. This insurance plan can also cover accidents that happen in the house.
Do I Need Home and Contents Insurance?
A home or another property is one of the most significant investments for anybody. Investing in a home and contents insurance can be the only way to ensure everything is safe at all times. Building insurance as a minimum is a mandatory requirement for a mortgage.
How Much Does Home and Contents Insurance Cost?
On average, in the UK, homeowners pay £161.75 a year. This results in an average price of just £3.11 a week to protect your home!
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FAQ
A mortgage is a loan from a bank or building society that allows you to purchase a property. The loan is repaid over several years with interest dependent on your personal financial situation.
A mortgage can be between one or more people. However, if you do not keep up your repayments, the lender can repossess your property.
All mortgage lenders have their own requirements. The following factors take a part in whether you will be given a mortgage offer, and how much the lender is willing to borrow you:
- Amount you wish to borrow
- Size of your deposit
- Employment status and income
- Credit rating
- Outgoings
- Existing debt
- Your age
- Length of the mortgage term
- Your credit status
- If you are applying solely or jointly
To be accepted by a lender, you need to assure lenders that you can repay your mortgage. One main aspect lender’s look at is your credit report to check your repayment history. Your credit file will include current and existing records on items such as credit cards, loans, overdrafts, mortgages, mobile phone/s, some utility payments and all accounts that have been open in the last 6 years. If your credit report shows arrears, defaults, CCJs, debt management plans or bankruptcy in the past, there are mortgage options available which we can help you with.
To get a mortgage you will need to save a deposit of at least 5%, but the more you save, the better your mortgage rate will be. If you have an existing property you own, you can use the equity in your property for this. Our skilled mortgage advisors can talk and guide you through the benefits and the difference in your monthly payments by increasing your deposit.
As soon as you have found the property you want to buy, our mortgage brokers will evaluate your personal needs and situations and recommend a mortgage product that is right for you. They will compare a wide variety of mortgage quotes, including products that cannot be found on the high street or comparison sites. This guarantees that you get the right deal at a right price.
If you agree to the mortgage product your advisor suggests, you will receive your Agreement in Principle (AIP). This will provide you with an estimated total of how much the lender is willing to borrow you and allows you to put an offer in on your ideal home.
If your offer is accepted, you will need to arrange a solicitor to deal with searches, surveys and contracts, which we can arrange for you. We manage the entire mortgage application process through to completion, liaising with your solicitor and lender to make sure your application is successful.
There are different mortgage options such as a remortgage. In this case we would recommend looking for a new mortgage deal approximately 3 months before your current deal expires. By beginning the mortgage process early it will allow you to prepare ahead of time to compare all the available mortgage products and submit your application. Do not worry if your mortgage is approved early as we will ensure that the completion date corresponds with your current deal’s end date.
A lot of mortgage lenders will lend you up to five times your salary. However, this all depends on several factors including your age, number of dependants and current financial commitments. Lenders will work out how much they will lend you based on what you can reasonably afford each month after you have paid your bills, credit cards, loans etc.
In addition, our mortgage advisers will assess your individual needs and situations to see how much you can realistically borrow before an application or credit search is completed. If you choose to continue with the application, our advisers will understand which mortgage lenders to approach to ensure you get the required loan amount.
In order to buy a property with a mortgage, you will need to save a deposit of at least 5%. However, the more you can save, the better your rate will usually be. There are a few exceptions to this as follows:
- If you already own a home, you can use the equity from your property for the deposit
- If you are a council tenant and are looking to buy your current home under the Right to Buy scheme, most mortgage lenders will now accept your Right to Buy discount as a deposit.
As property prices increase, first time buyers are struggling to save enough money to buy a home. In cases like this the government has therefore introduced ‘Help to Buy’ to allow first time buyers to get on the property ladder.
Our expert mortgage advisors are aware of various mortgage deals available and can help you decide which mortgage deal best fits your needs.
When buying a home, you will need to save enough money to pay for other factors and not just your mortgage deposit. This also includes paying for your mortgage fees, moving costs and legal expenses. We have listed below all the possible purchase and moving expenses you may have to pay, to help you with your budgeting. The exact fees and amount you will pay, is dependent on the value of the property you are buying and your chosen mortgage lender.
Mortgage booking fee: Some mortgage lenders will charge this to secure a fixed-rate or tracker deal.
Cost: £99 – £250
Mortgage arrangement fee: Some mortgage products will incur a mortgage arrangement fee, in addition to the mortgage booking fee. This fee is either paid upfront or added to your mortgage debt. If you chose to add it to your mortgage, the cost will increase over the lifetime of your mortgage.
Cost: £1,000 – £2,000
Telegraphic transfer fee: Needs to be paid to the lender to transfer the amount you are borrowing for the mortgage to the seller’s solicitor.
Cost: £25 – £50
Mortgage broker fee: If you use a mortgage advisor to arrange your mortgage for you, you will need to pay a fee or commission, depending on the value of your mortgage.
Cost: £197- £597. However, this may vary if you need to use a specialist lender
Valuation and survey fees: Charged by the lender to value the property you are buying. The cost varies according to which survey you choose:
Home condition survey: Most basic and cheapest of all the surveys and often used for new-builds.
Cost: £250
Homebuyer’s report: More in-depth survey, assessing the inside and outside of the property, and also includes a valuation.
Cost: £400
Building survey: A complete survey generally used for older or unconventional properties. Although they are the most expensive, they are certainly worth considering, as it could potentially save you a lot of money if any structural problems are found with the property.
Cost: £600
Higher lending charge: Can be charged by lenders if you borrow most of the value of the property.
Cost: Approximately 1.5% of the amount you borrow
Searches: Your solicitor will arrange for the local authority to check whether there are any issues that could affect the property’s value. The local council can charge a fee for carrying out these searches and may also request that a drains search be done at the same time.
Cost: £250 – £300
Legal costs: You will need to instruct a solicitor to carry out the necessary legal work for you.
Cost: £850 – £1,500 plus VAT
Stamp Duty Land Tax (SDLT): Charged on all purchases of UK land and property over £125,000. However, the amount you will pay is dependent on the purchase price of the property you are looking to buy, and whether you have owned a home before as follows:
First home: First-time buyers are exempt from paying SDLT on the first £300,000 of the purchase price of a property up to the value of £500,000. All purchases in excess of £500,000 will pay the standard stamp duty rates as follows:
- £0 – £300,000: 0%
- £300,001 – £500,000: 5%
Next home: If you are currently or have previously been a homeowner, you usually pay SDLT on increasing portions of the property price:
- £0 – £125,000: 0%
- £125,001 – £250,000: 2%
- £250,001 – £925,000: 5%
- £925,001 – £1.5 million: 10%
- £1.5 million+: 12%
Second property: If you are looking to buy an additional property, you usually have to pay 3% on top of the normal SDLT rates as follows:
- Less than £125,000: 3%
- £125,001 – £250,000: 5%
- £250,001 – £925,000: 8%
- £925,001 – £1.5 million: 13%
- £1.5 million+: 15%
For example, if you buy a next home for £275,000 the SDLT you owe is calculated as follows:
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the final £25,000 = £1,250
Total SDLT = £3,750
Information correct as of October 2021 – Source: www.gov.uk/stamp-duty-land-tax
Removal costs: Paid to the removal firm (if you choose to use one) to pack, transport and deliver your possessions to your new home.
Cost: £300 – £600
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