Great Mortgage Insurance Blog

Your different policy choices
There are two alternative reasons why males and females decide upon life cover the requirement to pay a significant debt, for example a home loan, on the event of them dying. or to bequeath a cash amount of money, which will provide for their dependents to exist in the manner they are used to. Various schemes have been produced to meet each of these desires.

Term insurance is the lowest option of life cover. You decide upon the amount you require to be insured for, together with the number of years the cover is to run. If you are unfortunate enough to cease to live within the years identified, a lump sum is made by the insurance firm. It is the case, if the policy term has finished your beneficiaries will be provided with nothing.

Decreasing-term and level term life insurance are the two principle choices of insurance to be decided upon. The suggested solution is frequently a combination of the two.

Level-term choices -the explanation.
A cash gift is made if you meet your death within a detailed time period. The level of protection remains constant through the duration of the term.

Who does it suit?
It is frequently the most suggested policy for giving a lump sum to protect your dependents, thus allowing them to meet their financial commitments after you have ceased to live. It is also a great scheme when you require a certain level of cover for a definite time period.

Details you should consider
The most straightforward way of moving forwards is to buy a single scheme, which is huge enough to address all of the demands of your family members, as well as providing for any debts such as a loan on your home. So it’s best to get quotes for mortgage cover.

However, it is occasionally preferable to separate the requirements of your life assurance protection. Then you will be aware which schemes you have organised and what they are for. Whilst level term may be sufficient for interest-only house loans, as the figure owed remains the same across the timespan, a lessening-term cover plan is a cheaper option for repayment mortgages.

Reducing-term cover plans
Lowering-term schemes have been produced to run at the same time as repayment loans on your home.

Lowering-term policies explained
As the name alludes to, the sum you are insured for lowers across the length of the policy.

Who should have this insurance?
The financial requirements for a decreasing term policy are an estimated 1/3 less compared with level-term protection schemes. A new name for a lessening-term policy is home loan protection insurance.

Family Income Benefit
Family income benefit is an alternative option of lessening term scheme, which provides an income, rather than a lump sum. If you think your family members would prefer a detailed income every 12 months, rather than a cash gift to deal with, then this is the option for you.

You might uncover that it is much easier to work out the level you want with family income benefit. E.g, if you are paid a net amount of one thousand nine hundred pounds a month, the same level can be awarded to your loved ones each month when you die.

All the insurance policies referred to in this article are regulated by the Financial Services Authority.

Summary
Many of those with critical illness insurance plans do not really apprehend how these policies function. There are appeals for more stringent guidelines on the marketing of such policies. Ordinary people need plenty of information on insurance products which best suit their individual needs.

The main financial regulating body published its apprehensions a few years ago that many thousands of insurance holders failed to appreciate what their insurance covered. Those worries are still valid.

The City Regulator, the Financial Services Authority announced that industry data showed that insurance companies, including supermarkets, financial advisers, banks and insurers often made no effort to establish if the life insurance policy was appropriate and inadequate explanation was presented to customers of how the policies work. While most companies were working to stick to enhanced standards, others carried on offering a poor service.

In the event that heart disease, stroke, cancer or other specified life-threatening illnesses strike, critical illness cover, insurance pays out a lump cash sum. Usually, it is those who are concerned about repaying debts if they become unable to remain working, who buy this cover.

There are two kinds of policy: those with a guaranteed fixed premium each month and those where the monthly payments increase over time.

Figures from the ABI indicate that, in total, there are in excess of four million insurance plans covering 12m policyholders. An average policy will pay out £67,000.

These “protection” policies have proved to have critics. While the plans might bevery benefitial, these “protection” plans have proved controversial and critics say that not many people make a claim. There is no information available on the numbers of policyholders making a claim made contrasted against the total expenditure on the premiums. The city regulator, the FSA, review did demonstrate, however, that on average, twenty five per cent of the claims made are not paid out.

Recently, in one situation a client was found to have with cancer but medical teams could not say which one. The client was regretably informed it was unlikely the cancer consultants would know for certain until he had passed away. Until the medical team could be certain what type of cancer he had, his insurance plan would not pay out. The policyholder’s financial advisers appealed realising that should he die, the insurer would pay out a life assurance plan worth £15,000 rather than the critical illness policywhich was worth eighty five thousand pounds as only one policy would pay out. The argument with the underwriters caused infinitely more stress to the plan holder. After a public fight, the insurance company agreed with the policyholder’s advisers and paid out on the critical illness plan.

Which?, now known as the Consumers’ Association,  said it thinks the situation is considerably more serious than the City Regulator claims and that sales of critical illness policies are at the centre of a far-reaching mis-selling problem.

Mick McAteer, principal policy advisor, says brokers, commission-hungry advisors and finance companies, saw  a good chance to make excellent earnings. He said the Consumers’ Association had predicted the mis-selling that was seen in the pensions industry and would be replicated in the critical illness sector.

His forecasts are on the back of complaints in in parliament regarding the mis-selling of critical illness policies. Simon Curzon, the MP, says the FSA’s study reveals there is a big risk that insurance policies are being sold to consumers who do not appreciate what they are buying or who don’t even need them. The MP wants the Financial Services Authotity to make changes to its rules that would limit sales to financial advisers working under strict guidelines.

Summary
Protection Insurance is a necessary product, will it become more popular? The Insurance Companies are now taking the right steps. We hope they will be successful. Read this article to find out what is now happening in the insurance market.

Not many expert financial advisers would disagree that life cover should be the basis of most peoples financial planning whether it be safeguarding against the consequences of premature death, long term illness, accident or (particularly now with the arrival of the credit crunch) cover for unemployment.

Life assurance cover is justifiably the root of financial planning whether it be used to insure your home owner loan or give a tax free lump sum for your dependants in the event of your death. Unhappily, some other forms of protection insurance have a less enviable reputation. Payment Protection insurance has a name for being miss-sold and critical illness cover has formally suffered from uncontrolled policy exclusions which enabled the insurers to refuse a large number of claims, even if they seemed legitimate.

But over the last few weeks a shimmer of light emerged when Scottish Provident gave out its 1st half figures on the result of claims on its critical illness insurance policies. These figures appear to mean that at last the problem of unintended disclosure of medical information when the policy application is concluded, is being resolved.

Some years ago critical illness insurance claims were being time after time refused on the merest hint that the client had omitted any minor medical detail – even a foot infection or a sore throat! According to the figures presented by Standard Life, their claim refusals have come down sharply from 6.7% the previous year to 1.5% in the previous 6 months.

Why has this happened? LV, Scottish Equitable, Norwich Union, Scottish Provident, Axa, and Friends Provident  have initiated a collection of changes designed to diminish their refusal rates. They start off with an extremely clear explanation of the importance of full medical revelation right down to when they last visited their Doctor no matter how minor the reason. And some insurance companies such as LV get a medically trained person to telephone each potential client to discuss their medical history in detail. Then when the policy goes on risk, some insurance companies are reminding the insurance holders of the importance of full medical disclosure and giving them the option of correcting or adding the details on their submission.

If the new details are considered as increasing the insurer’s risk, then the life insurance company will certainlywithout doubt raise the monthly premium – but that’s certainly far better than paying the previous premium for years and years and then getting a claim refused.

The insurers should have taken  this action a long time ago as their slow coach method has damaged the public’s perception of protection insurance. But there is an undoubted need for protection insurance so let us hope that it achieves the recognition its so rightly warrants.

Summary
This article airs the problems with the over fifties plans that do not want your medical history but are they financially worth it? Carry on reading for more information.

The over 50’s Life Insurance Plans are becoming extremely popular.

They promise acceptance without medical questions and are regularly promoted by famous people like Jerry Hall and Michael Parkinson. Consumers who buy these plans may be paying far more in than their beneficiaries will get out.
promising a pay out on the policyholder’s death, payments start from around £8 increasing to about sixty pounds. Being sold to people between fifty and eighty the payout is controlled by the premium paid, age and gender when the policy begins.

Significantly, no enquiries about their health are made.  Some insurance plans stop after a specific amount of time, but are valid until the insurance holder passes away. In other insurance plans the payment is taken until the holder passes away, in spite of this insurance holders could pay more in than they get paid out depending upon when they die.
Referring to adverts for The Post office’s over 50’s Life Cover, Leon Myers of independent financial advisers CBK Colchester states ‘I can’t understand George Clooneysupporting this style of life insurance plan. He is first-rate act, but the same cannot be said for this policy.’

The Chairman of The Post office’s over 50’s Life Cover, Joel Winters defends Douglas’s role, saying he’s simply making consumers aware of the products existence , for this particular plan there is a substantial demand .He states, ‘The draw is their affordability because of their low premiums and the guaranteed acceptance process.’

Nevertheless, you could get a better deal elsewhere purchasing regular cover on identical terms ‘People could get 3 or 4 times as much for their money from an ordinary life insurance cover, in exchange for responding to a few questions.’ Says Alan Lakey of TGB financial services.

Not demanding any health history imposes much dearer fees as these plans interest clients with pre-existing conditions who may die before the company has covered its cost. Life Insurance companies also freeze any settlement for the first two or three years to  guard themselves. A refund of the payments made is normally refunded if a policyholder departs this life from natural causes during this time.

Director of financial services at Tesco, Jonathan Smith, acknowledges that the cost could be less for standard life assurance but often by the time you reach your 50’s, many have undergone some type of illness, therefore why consumerschoose the over fifties policies. Policyholders’putting in more than they ever retrieveis one area he does not agree with. ‘When we put together our plan we decided to put a cap on the premiums,’ he states, this means that once the insurance holders have paid the sum assured their premiums cease.

Most over-fifties life insurance plans do sooner or later have cut off points, but many clients have paid over the odds before this time. Premiums normally stop at 90 with the Liverpool Victoria plans and the PO running them for a set length of time.

One primary reason people purchase these plans is to pay funeral expenses. However, the final pay out may not be nearly enough. An up-front payment plan would be a better selection with Swan Hill and District Funerals supplying 3 packages priced between 2,535 pounds and 3,304. This type of plan can be paid for over three years.

Summary
Some of the ways in which the insurance market is tackling mis-sold life insurance policies. The difficultieslinked to payment protection policies are highlighted.
The mis-selling of life insurance policies by a substantial number of mortgage lenders has to be tackled by the Government. Action has been taken by the Department of Trade and Industry, who have nearly completed their investigationinto the lock in of home and contents insurance with mortgages. An announcementbarring the practice is to be expected very soon.

However some senior figures in the insurance market have criticised the investigation for paying no attention to the selling of life insurance. The difficulty focuses around the practise of overcharging for life insurance, while not providing sufficient choice of productsgoods as part of their mortgage packaging. Edgar and partners, the independent financial adviser, says that the DTI’s understanding of mortgages fall short of the criteria wanted to make their investigation plausible. The result being that life cover has been overlooked.

 Mr Times says that just as some lenders have been asked to account for locking in building and content cover to a mortgage, so should the substantial number of providers who misinform customers intothinking that along with their mortgage they must take out life insurance. Mr Bolgergoes on saying that while providers may not insist on customers taking out life insurance, they can be convinced that they have no choice through the lender being economical with the truth.

60 per cent of life cover is sold by mortgagelenders, however it can be purchased through independent advisers or direct providers.

However a DTI spokesman has said that their investigation carries on into a huge range of insurance tie-ins. A provider who met Geoff Hoon has said that life cover has been glanced at, while more importance has been placed on home and contents.

The problem with consumers being forced to buy uncompetitive life cover and home insurance policies is just as important for both commodities.

The problems are much more serious with payment protection insurance. About half of all clients who have been influenced into taking out a  PPI may have been provided with the wrong product. In addition the majority of people who purchased one of these debatable insurances expect far more than they would in truth be given should they not be able to pay their bills.

A broad study has found that around 25 per cent of people are under the illusion that they will be paid a monthly wage from their Payment Protection Insurance policy, rather than understanding the policy would only cover their debts.

nother 20 per cent said they thought the policy would cover them if they could no longer meet their repayment obligations for any reason, and six per cent said they thought their medical expenses would be paid for if they became sick .

Several people thought the policy would keep going indefinitely to meet their ongoing debts, others thought their insurance would cover breakdowns and living expenses.

Yearly sales of Payment Protection Insurance policies are said to create payments of around 6.4 billion pounds for the insurance business. However an astounding 4 billion pounds of this is said to be pure profit. Studies suggest  that a number of banks can charge up to five hundred per cent more than others for similar.

The Office of Fair Trading is studing the sale of Payment Protection Insurance preceding complaints from the National Consumer Council and Citizens Advice. It recently empasized disquiet that banks are enticing customers by advertising deceptively cheap loans and then hammering them with huge additional costs by selling expensive Payment Protection Insuranceas part of the deal.

As a consequence, a loan which seems to provide good value becomes far more expensive.

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