Home | Contact | About us | Services for people | Services for business | Links

Insurance

Insurance

Surveys

Life insurance is essential for most home owners. This is a brief explanation of the main types of policy.

Term Policies

A term policy is a basic insurance policy pure and simple. If you die during the policy term, the benefit is payable; and if you survive, nothing is payable. The premiums are very low and this is a cheap way of obtaining a large amount of insurance cover. Term policies can be obtained for varying periods, say 5, 10 or even 20 years. The death benefit is usually a guaranteed sum.

Endowment Policies

 Endowment mortgages are now rare.  The benefit under an endowment policy will be payable either on your death while the policy is in force, or at the end of the policy term if you survive. There will normally be a guaranteed minimum amount payable on death, and also a (lower) guaranteed minimum payable at the end of the term. Such policies are usually "with profits", so that "bonuses" are added to them as time passes. This increases the amount payable at the end of the term. The final amount payable depends largely on how well the life company's investments perform. For this reason it is important to take out a policy with a good insurance company. The difference in final benefit between a top performing company and a poor one can be enormous. Endowment policies are normally taken out for long terms, say 25 or 20 years, and nearly always over 10 years.

Mortgage protection policies

This is really a special type of term policy where the benefit on death is linked to the mortgage debt. If you die, the policy should pay off your mortgage debt. However, it would not necessarily pay off any arrears. Like an ordinary term policy, if you survive the policy term, no benefit is payable.

Obtaining insurance advice

Insurance advisers fall into two categories.

Independent Intermediaries can sell policies from any life company, and by Law are obliged to give you "best advice". This means that they must review the market and advise you which policy would best suit your needs. They are not permitted to have any tie with any particular life company.

Tied Agents are advisers who are tied to a single company. They cannot offer policies written by any other company. In our view this means that they cannot offer a complete range of products. In theory they must offer "best advice". However we think that in practice most tied agents would be unlikely to advise you to go elsewhere if another company's policy would in fact be best for you. Many estate agents sell life policies, but most are tied agents. Some of the building societies are still independent intermediaries, but many are now tied agents. You will not get independent advice if the organisation advising you is a tied agent. This applies to advice given by most estate agents and many of the building societies. One of the reasons why these organisations have gone "tied" is that it is easier to sell policies in this way. We think though that it is not better for the customer.

Obtaining independent advice

We recommend that everyone should take independent advice. It does not take any imagination at all to realise that if the best policy for you is one issued by X Assurance Company but you go to Y Assurance Company's agent, he is not going to sell you the best policy. This is why you should take independent advice.

We do not sell life insurance and so we have no axe to grind.

A word of warning

Life policies are long term investments. It is not unknown for some salesmen to be so keen to arrange a new policy for you that they will advise you to surrender an existing life policy and take out one of theirs instead. Reputable advisers will not do this. To surrender an existing policy is almost always a mistake. We recommend that you seek our help before taking this step.

Buildings and contents insurance

It is essential to insure both the structure and contents of your house. If you have a mortgage, the lender will normally insure the house itself as a matter of course. Some lenders offer package policies covering both contents and the building. You must be sure that you know what insurance you have taken out.

If you do not have a mortgage, you will need to take out a policy yourself. If you wish, we can arrange this.

When to insure

It is an unexpected rule of law that a buyer of land is bears the risk of it being damaged from the date he agrees legally to buy it, and not, as you would expect, from the date it becomes his. This means that as soon as you have exchanged contracts, you should insure the property. If you do not, and the property is damaged, you could still be forced to complete the purchase. Often however, contracts are arranged so that it is not necessary for the Buyer to insure until completion of the purchase. Legal advice on this point is essential.

Beware of under insurance.

In the case of the building itself, you must insure for the "full reinstatement value" of the house. This is what it would cost to demolish the house and rebuild it, allowing for site clearance costs and architects fees. If you insure for less than the right sum and have a claim, the insurance company would be entitled to refuse to meet the claim in full.

In the case of contents, there are two options, basic cover and "new for old". With the first, if, say a carpet, is damaged, the company will pay only the actual value of the carpet. With "new for old", they would pay for a new carpet without making a deduction for the age of the old one.

Again, if you do not insure for the right amount, the company may refuse to pay claims in full.

Full disclosure

With all insurance, it is vital to disclose on the application form everything which might be relevant.

Obviously this means that with life policies, it is essential to be honest about your health.

The reason is that if you have misled the insurance company on the proposal form in any way at all, they will be entitled to refuse to pay out on a claim. Unfortunately, the law says that you should disclose everything even if the insurance company has not asked about it. We think that this is unfair, but it is the law.