What type of cover do I need? Am I paying too much for my insurance? Is my insurance good value for money?
Hopefully you will never need to make a claim against your insurance. If you do however, you want to be sure that the insurance you have is right for you. Niche can give you guidance on what type and level of insurance is suitable for you and ensure you get it at a competitive price.
The following are common types of insurance we arrange for clients (but there are also many more):
- Income Protection
- Accident, Sickness & Unemployment Protection (ASU)
- Life Protection
- Critical Illness Cover (CIC)
- House Insurance
Whole of Life insurance
What is Whole of Life insurance?
Whole of Life insurance guarantees the payout of a lump sum whenever the policyholder dies, so long as the monthly premiums are maintained. Under unit-linked or with profits whole of life cover, some of your monthly premiums are invested by the insurer into life funds. This means that both your premiums and your sum assured – which is the money paid out to your beneficiaries can change.
What are the different types of Whole Life insurance?
Whole of Life insurance cover comes in two main forms – maximum cover and balanced cover.
Maximum cover policies allow you to get a higher amount of cover for a lower initial premium. The premium is lower because almost all of it is used to pay the actual costs of your cover during the current review period, with nothing held in reserve to help meet increasing costs in later years.
After 10 years, a policy review takes place to work out the cost of your protection benefits up to the next review point, which is usually after another five years. It's normally necessary to increase your premiums in order to keep the same level of cover. This is because your cover costs more as you get older and your policy is unlikely to have built up any surplus funds to help with the increasing costs.
However, any changes in your health aren't taken into account when working out the cost of your cover, as long as your premiums are maintained. This means that even though your premiums are increasing, the premium for a new policy could be even higher, depending on your health.
Balanced cover policies start with a higher premium, but aim to maintain a more level premium throughout the life of your policy. The aim of the higher premiums is to build a value in your choice of investment funds. This is used to help meet the increasing costs of your protection benefits in later years, reducing the need for your premiums to increase.
The level of growth achieved by this investment element cannot be guaranteed though, so your premiums may still need to increase to keep the same level of cover. This is particularly likely once you reach age 65 (which is when life cover costs start to rise sharply), or once the value of your investment funds has been used up.
What are the advantages and disadvantages of Whole Life cover?
Whole of Life cover comes with distinct advantages and disadvantages.
The most obvious advantage of whole of life cover is that it pays out whenever you die. This is not like term life insurance which only pays out should you die during an agreed term. Conversely then, the disadvantage of this is that the premiums will usually be more expensive, and will take a bigger slice out of your monthly income.
Whole of life policies are generally only suitable if you can afford to be flexible about the eventual payout to your dependants. If you can’t, a term insurance policy may be a better option.
What is home insurance?
Home insurance is an insurance policy that may combine various personal insurance protections. This can include losses occurring to one's home, contents, loss of use (additional living expenses), or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.
A homeowner policy is referred to as a multiple-line insurance policy, meaning that it includes both property insurance and liability coverage with a single premium, meaning that only one premium is paid for all risks.
The cost of home insurance often depends on what it would cost to replace the house and which additional endorsements or riders are attached to the policy. The insurance policy is a legal contract between the insurance carrier (insurance company) and the named insured(s). It is a contact of indemnity and will put the insured back to the state he/she was in prior to the loss. Typically, claims due to floods or war, amongst other standard exclusions (check the terms before signing so that you are safe) are excluded. Special insurance can be purchased for these possibilities. Insurance should be adjusted to reflect replacement cost, usually upon application of an inflation factor or a cost index.
The home insurance policy is usually a term contract—a contract that is in effect for a fixed period of time. The payment the insured makes to the insurer is called the premium. The insured must pay the insurer the premium each term. Most insurers charge a lower premium if it appears less likely the home will be damaged or destroyed. There is also Perpetual insurance, a type of home insurance without a fixed term, can also be obtained in certain areas.
What are the types of policies?
The Insurance Services Office has standardized homeowners insurance forms in general use, These are the normal polices used:
HO0 – Dwelling Fire Form Homeowner Policy
A form that provides coverage on a home against fire, smoke, windstorm, hail, lightning, explosion, vehicles, and civil unrest. It does not cover your personal property, personal liability, or medical expenses. It is the type of policy your mortgage lender will buy for you if you let your homeowner policy lapse.
HO1 – Basic Form Homeowner Policy
A basic policy form that provides coverage on a home against 11 listed perils; contents are generally included in this type of coverage, but must be explicitly enumerated. The perils include fire or lightning, windstorm or hail, vandalism or malicious mischief, theft, damage from vehicles and aircraft, explosion, riot or civil commotion, glass breakage, smoke, volcanic eruption, and personal liability. Exceptions include floods, earthquakes. Most states no longer offer this type of coverage
HO2 – Broad Form Homeowner Policy
A more advanced form that provides coverage on a home against 17 listed perils (including all 11 on the HO1). The coverage is usually a "named perils" policy, which lists the events that would be covered.
HO3 – Special Form Homeowner Policy
The typical, most comprehensive form used for single-family homes. The policy provides "all risk" coverage on the home with some perils excluded, such as earthquake and flood. Contents are covered on a named peril basis. (Note: "All Risk" is poorly termed as it is essentially named exclusions (ie, if it is not specifically excluded, it is covered)).
HO4 – Tenants Form Homeowner Policy
The Tenants form is for renters. It covers personal property against the same perils as the contents portion of the HO2 or HO3. An HO4 generally also includes liability coverage for personal injury or property damage inflicted on others.
HO5 - Premier Homeowner Policy
Covers the same as HO3 plus more. On this policy the contents are covered on an open peril basis, therefore as long as the cause of loss is not specifically excluded in the policy it will be covered for that cause of loss. (can also be achieved by endorsing an HO15 to the HO3)
HO6 – Condominium Unit Owners Form
The form for condominium owners. It insures your personal property, your walls, floors and ceiling against all of the perils in the Broad Form.
HO8 – Older Houses
The "Modified Coverage" form is for the owner-occupied older home whose replacement cost far exceeds the property's market value.
Relevant life cover
What is Relevant Life cover?
A Relevant Life Plan is a term assurance plan available to employers to provide an individual death in service benefit for an employee. It is designed to pay a lump sum if the person covered dies or is diagnosed with a terminal illness whilst employed during the term. A Relevant Life Plan is paid for by the employer.
Relevant Life Plans are not available where there is no employer/employee relationship. For example, sole traders, equity partners of a partnership or equity members of a Limited Liability Partnership.
Who is it aimed at?
Usually Relevant Life Cover is aimed at people like:
- Employers looking to provide 'death in service' benefits, but with too few employees to set up a group scheme.
- Directors wishing to provide their own individual ‘death in service’ benefits without taking out a scheme on all employees.
- High earning individuals, such as directors, where it is a requirement that ‘death in service’ does not form part of their ‘lifetime allowance’ (£1,055,000 in 2019/20).
What are the advantages of Relevant Life Cover?
- The policy premiums paid for by the business are not normally assessable on the employee as a benefit in kind so they are not subject to income tax.
- The policy premiums paid for by the business are not normally assessable for employer or employee National Insurance contributions.
- The policy premiums may also be treated as an allowable expense for the employer in calculating their tax liability provided that the local inspector of taxes is satisfied they qualify under the ‘wholly and exclusively’ rules.
What are the rules that qualify a person for Relevant Life Cover?
- The policy must only provide a lump sum benefit on death payable before the age of 75.
- The plan must solely pay out on death and have no serious or critical illness cover included.
- The plan must not have a surrender value.
- Any benefit payable from the policy must only be payable to an individual or a charity.
- The main purpose of the relevant life policy should not be for the avoidance of tax.
How can we help?
We here at Niche are insurance experts, and can help you with any queries that you may have. When you contact us about Relevant Life Cover we will take your details and the details of the person you are covering. We will then look for all the cover that you will need and hunt for the lowest available quote. After we have secured you the best deal we will help you fill out the paperwork and get your plan in order.
Private Medical Insurance (PMI)
What is it?
Private Medical Insurance is used to cover the cost of private medical treatment for curable short term medical conditions. Private medical insurance includes the cost of surgery specialist accommodation and nursing in a private hospital or in a private ward in an NHS hospital. Usually there are two types of private medical insurance - standard and comprehensive:
- Standard Private Medical Insurance covers hospital and emergency treatment. This type of cover will include in-patient and day care treatment only.
- Comprehensive plans offer additional coverage including such care as outpatient treatment, dental treatment, complementary medicine, maternity travel and personal accident cover.
Usually PMI does not cover chronic or critical illness that cannot be cured for example multiple sclerosis, asthma or diabetes. However if there is an emergency they will pay for the conditions to be stabilised until you return to your previous level of health.
Why do I need it?
Here are some of the reasons why people consider health insurance:
Find out what's wrong: if you are unwell and you are referred to a specialist by your GP, you will normally be able to arrange a specialist appointment within a few days.
Get treated: if you do need any further tests or an operation, you can arrange this at a time and hospital convenient to you.
Facilities available: most private hospitals have access to up to date technology and will offer patients a private en-suite room, TV and a choice of food from a menu.
What types of benefits and exclusions will I expect?
All policies carry a list of general exclusions from cover and some companies have additional exclusions more or may place financial limits on certain benefits offered, particularly benefits such as routine dental cover or maternity cover. The most common exclusions are:
- Alcoholism or drug abuse
- Dental treatment
- GP services
- HIV or AIDS
- Hazardous sports
- Normal pregnancy
- Treatment Overseas
- Cosmetic surgery
In addition to any general exclusions, others may be applicable depending on the medical history of the family members you wish to include in the policy. If information on the application form names medical conditions that you or other family members have recently suffered from, often going back five years, an insurer may either qualify the cover offered or exclude such conditions from cover entirely.
How will we help?
When you contact us we will take your details, your health status and financial well-being, then we will discuss which level of cover would be best for you depending on the information that you provide. Then we will ensure that you are given the best quote possible by checking all the different providers.
Key Man Protection
What is Key Man Protection?
It can be described as an insurance policy taken out by a business to compensate that business for financial losses that would arise from the death or extended incapacity of an important member of the business. The insurance can only be taken out on a person if the business would suffer financial loss if that person was unable to work.
Why would you take out this type of insurance?
Many businesses have a key person who is responsible for the majority of profits, or has a unique and hard to replace skill set that is vital to the organisation.
An employer may take out a key person insurance policy on the life or health of any employee whose knowledge, work, or overall contribution is considered uniquely valuable to the company. The employer does this to offset the costs (such as hiring temporary help or recruiting a successor) and losses (such as a decreased ability to transact business until successors are trained) which the employer is likely to suffer in the event of the loss of a key person.
When can you claim?
The policy will pay out to the business on either/or the death of the key person or if they suffer a critical illness depending on the type of cover taken out.
What can we do?
We here at Niche are insurance experts; we can help you with any queries that you may have. When you contact us about Key Person Cover we will take your details and the details of the person you are covering, we will then begin looking for all the cover that you will need and will hunt for the lowest possible quote. Once we have secured you the best deal, we will help you fill out the paperwork and get your plan in order.
Income Protection Insurance (IPI)
What is it?
When you take out Income Protection insurance, you are provided with a replacement income if you are incapacitated and unable to work due to illness or accident. This policy was formerly known as Permanent Health insurance.
How much do you get if you are unable to work?
Income Protection payouts are usually based on a percentage of your earnings: 50% to 70% of your wage is what you would expect to get. Payments are tax-free.
IPI policies only pay out once a pre-agreed period has passed, generally ranging from one to 12 months after you become incapacitated. The longer the 'deferral' period you choose, the lower your premiums. The most popular deferral periods tend to be 13 or 26 weeks.
Why would you need income protection?
With research provided by Unum and Personnel Today, it showed that only 12% of employers support their staff for more than a year if they are off sick long term. With the lower amount of income (Statutory Sick Pay (SSP)) from the government, income protection would give you enough of a wage to keep yourself afloat until you were able to get back to work. Self employed people have no employer for support and aren't eligible for SSP.
What are the benefits to Income Protection insurance?
- Benefits are payable when the policyholder becomes incapacitated and after the deferred period has passed and continue until the earliest of death, recovery of health, retirement or the expiry of the term of the contract.
- Benefits are paid regularly (usually weekly or monthly) and are free of tax.
- The insurance company cannot cancel or refuse to renew the policy provided that the policyholder continues to pay the premiums.
- A waiver of premium option may be provided whereby premiums for the IPI policy are not required while benefits are being paid from the policy, but the policy cover continues as normal.
What are the restrictions?
- The policies do not pay out if the policyholder becomes unemployed for a reason other than illness or accident.
- The deferred period is usually quite long, often a minimum of 4 weeks but perhaps as long as 52 weeks. Premiums decrease as the deferred period increases.
- There are a number of exclusions which apply to most policies, so that no benefits are payable for accidents or illness arising from events such as drug or alcohol abuse, criminal acts, intentional self-harm, wars and pregnancy.
- Due to the benefit limits, the maximum regular payment is usually restricted to prevent moral hazard – if the benefit exceeds the policyholder's income they have a reduced incentive to return to work once their health recovers.
- On change of occupation (or unemployment) of the policyholder the policy may become invalid, or the life office may require the premiums to be changed to reflect the new risk.
- For individual policies, as the benefits paid are not taxable income, they are not classed as relevant UK earnings for pension contribution purposes so tax-relievable pension contributions will be limited to £3,600pa.
What are the different types of cover I can get?
In addition to standard fixed-premium Income Protection insurance policies there are a number of variations available from some different offices:
- Renewable Income Protection Insurance – renewable policies give the policyholder a right to renew the policy, possibly with an increase in cover, at a set period (often 5 years), based on the prevailing premiums for a person of their age and occupation. Premiums will initially be cheaper than a fixed IPI policy but will then increase each renewal as the policyholder gets older.
- Reviewable Income Protection Insurance – the term of a reviewable IPI policy will be the same as a fixed policy, but the premiums will be reviewed (and almost invariably increased) by the life office every few years, based on its general rates (not based on the health or claims of the policyholder). Initial premiums will then be cheaper than for a standard policy.
- Increasing Income Protection Insurance – the value of the benefit payable by a fixed-benefit policy is eroded over time by inflation so policies whose benefits increase are often more suitable. The benefits may increase at an indexed rate (such as the Retail Prices Index), a fixed percentage or by a percentage chosen by the policyholder every few years. For such increasing policies, premiums usually increase as well.
- Unit-linked Income Protection Insurance – most IPI policies have no investment element and hence no surrender value, however a unit-linked policy has an investment element similar to unit-linked life assurance policies. Premiums will normally be more expensive than standard policies due to the investment element, and could be still more expensive if the return on the invested premiums is poor.
- Group Income Protection Insurance – employers may provide a group IPI policy for their employees. For group policies a maximum payout period may apply and the policy will expire if the employee ceases employment with the employer. As these benefits enable the employer to maintain some of the employee’s salary, the amount received by the employee is treated in exactly the same way as salary.
What will we do?
When you contact us, we will arrange a meeting so we can establish what level of cover is best suited for you. Once we have discovered that we will go directly to the various providers to find out who can give you the best possible deal for your cover.
Family income benefit
What is Family Income Benefit?
Family Income Benefit is a life insurance policy that pays an income to dependants on the death of the insured. The income is payable for the remainder of the policy term.
These policies are suitable for people with young families who wish to protect against the loss of income provided by either or both parents. On top of the normal cover you can also add critical illness cover, this protects your family if you are taken ill with a serious condition.
How does it work?
If you choose a Family Income Benefit Life Insurance policy your dependants will receive an annual income from the time you die to the end of the policy term.
The income is tax free and the money from your life insurance payout can be used for whatever purpose your dependants require. Premiums can be paid monthly or annually by direct debit from your bank account.
Why purchase Family Income Benefit insurance?
If you were to pass away unexpectedly then you will be leaving your family without a major source of income. So family income benefit is set up so that even if the worst should happen your family will receive financial support.
How can we help?
If you call us about family income benefit we will help you decide what level of cover you should have. We will then go directly to all the different providers to get quotes on who can give you the best offer.
Once we have narrowed down all of the providers and their offers we will help you each step of the way to make sure that all of the paperwork is completed without any issues.
Decreasing mortgage cover
What is Decreasing Mortgage cover?
Decreasing term mortgage life insurance provides a cash lump sum for your loved ones to pay off any outstanding debt on a repayment mortgage should the worst happen.
With decreasing term insurance the level of cover declines over time with the amount remaining on your mortgage. This means that as the amount of cover falls each year with decreasing term insurance there is a reducing amount of risk for the insurer, therefore premiums are far lower than for a level term plan.
The alternative to decreasing mortgage life insurance is level term insurance, which provides a fixed level of cover and is designed for interest only home loans.
What does it cover?
- Death: If you pass away within the term of the policy this type of cover would payout a lump-sum that can be used to repay the remaining amount left on the mortgage
- Terminal illness: Leading life assurance policies can also payout early if you are diagnosed with less than 12 months to live by a medical practitioner.
- Critical illness: This option also enables the plan to payout if you were to suffer any one of around 35 to 40 conditions - these are usually named in the policy terms.
How does it work?
Stage 1: You pass away (or suffer a terminal illness or defined critical illness, if covered) during the policy term (set equal to your mortgage length).
Stage 2: Your family make a claim with the insurer (including your death certificate for verification).
Stage 3: The insurer pays the sum assured either into trust or directly to a joint policyholder or in line with the deceased's will/intestacy.
Stage 4: Those life insurance funds can then be used to repay the mortgage loan in full.
Do I need it?
Although mortgage life assurance is not compulsory it is worth considering this plan if your family would struggle to keep up with the loan repayments if you passed away. So what choices do you have when it comes to this type of cover?
1. Choose your level of cover
This is usually set equal to the amount of debt still outstanding on the mortgage so the loan can be cleared in full should you pass away.
2. Choose your length of cover
This is often set equal to the length of time the loan has left to run so repayment can be made if you die at any point during the mortgage.
3. Include critical illness cover
This is an option that can be added to your life insurance policy so the mortgage can be repaid should you suffer a critical illness condition.
What will we do?
Although thinking about what could happen in the event of death is something that we all hate doing, we at Niche would like to give you peace of mind that all of your worries and concerns will be covered.
If you contact us you will be put straight through to our experienced team, who will help you along every step of the way. We will go through all of the options and make sure that you are fully covered and have the best deal that we can provide for you.
Critical illness cover
What is Critical illness cover?
Critical Illness Insurance or Critical Illness Cover is an insurance product, where the insurer is contracted to typically make a lump sum cash payment if the policyholder is diagnosed with one of the critical illnesses listed in the insurance policy. There may also be a payout if the policyholder undergoes certain surgical procedures, for example, having a heart bypass operation.
The policy may also be structured to pay out a regular income.
The contract terms contain specific rules that define when a diagnosis of a critical illness is considered valid. It may state that the diagnosis need be made by a physician who specialises in that illness or condition, or it may name specific tests that will confirm the diagnosis. The policy may require the policyholder to survive a minimum number of days (the survival period) from when the illness was first diagnosed.
The survival period used varies from company to company, however, 14 days is the most typical survival period used.
The schedule of insured illnesses varies between insurance companies.
Examples of other conditions that might be covered include:
- Kidney failure
- A major organ transplant
- Multiple sclerosis
- HIV/AIDS contracted by blood transfusion or during an operation
- Parkinson's disease
- Paralysis of limb
- Terminal illness
Due to the fact that the incidence of a condition may decrease over time and both the diagnosis and treatment may improve over time, the financial need to cover some illnesses deemed critical a decade ago are no longer deemed necessary today.
Likewise, some of the conditions covered today may no longer be needed a decade or so in the future.
Why would you want Critical Illness Cover?
Critical illness may be purchased by individuals in conjunction with a life insurance or term assurance policy at the time of a residential purchase, known as a 'bolt-on' benefit.
The finances received could be used to:
- Pay for the costs of the care and treatment
- Pay for recuperation aids
- Replace any lost income due to a decreasing ability to earn
- Repay a mortgage
- Fund for a change in lifestyle.
This insurance can provide financial protection to the policyholder or their dependants on the repayment of a mortgage due to the policyholder contracting a critical illness condition or on the death of the policyholder.
In this type of product design, some insurers may choose to structure the product to repay a portion of the outstanding mortgage debt on the contracting of a critical illness, whilst the full outstanding mortgage debt would be repaid on the death of the policyholder.
Alternatively, the full sum assured may be paid on diagnosis of the critical illness, but then no further payment is made on death, effectively making the critical illness payment an 'accelerated death payment'.
What is contents insurance?
Contents insurance is insurance that pays for damage to, or loss of, an individual's personal possessions whilst they are located within that individual's home.
Some contents insurance policies also provide restricted cover for personal possessions temporarily taken away from the home by the policyholder.
In this context "possessions" means anything that is not permanently attached to the structure of the home (possessions that are permanently attached to the structure of the home can only be insured via home insurance). Some contents policies may also include possessions kept in the garden area attached to the house.
Is Contents Insurance Compulsory?
Unlike buildings insurance (which a mortgage lender will usually insist on), contents insurance is optional as your home's contents belong to you. Nobody, other than yourself, is at risk of loss if you are the unlucky person who has been robbed, or if there has been an accident which lead to your house/contents being damaged/destroyed (water damage/fire damage).
What does contents insurance cover?
Contents insurance typically covers damage which occurs due to fire, lightning, explosion or earthquake, theft (or attempted theft), riots or vandalism, storms or flooding, subsidence, falling trees, moving objects (such as a cars hitting your home) and escaping or leaking water or oil.
Contents insurance also usually covers:
- Your legal liability as occupier of the house, eg if a visitor has an accident and injures themselves
- Cost of accommodation and storage if you can't live in your home because of damage (e.g. fire, flooding etc)
- Some accidental damage to stereo equipment, TVs, computers, DVD players and any glass in furniture (e.g. a glass tabletop)
- Replacement keys and locks, and locksmith's fees if you lose or damage your keys
- Damage to TV and radio aerials, and satellite dishes
- Loss of food if a freezer breaks down
- Theft of cash from your home
- Contents of your outbuildings (although the amount of cover varies a lot from policy to policy and there may be lower limits for theft).
What can we do for you?
When you call us we will help you work out what level of cover you will personally need, so that you are not overspending for unnecessary levels of cover that will never help you.
Then we will contact all of the providers to see who can offer you the best deal on this type of insurance. We will also help with home insurance if you require it.
Accident, Sickness and Unemployment Insurance
What is it?
Accident, sickness and unemployment insurance, also known as ASU, pays a percentage of a person's mortgage payments if they are unable to work due to an accident, if they are sick or if they have been made redundant.
The insurance will continue to provide you with payments for up to two years or until you have returned to work. Usually the payment will start between 30 days and 60 days after you claim, this is usually so that the insurance can verify your claim. What's important to understand is that most policies will not give unemployment cover to casual, part-time workers or the self-employed.
What are the terms?
Terms and conditions naturally vary from policy to policy but here are a few of the most common:
- There is often a delay before the unemployment element of the cover starts
- Once you make a claim, usually there is a waiting period (often 30 or 60 days) before the policy starts to pay out
- Policies usually pay out only for a limited period, e.g. 12 or 24 months
- Most policies will not cover any claims related to health problems that already existed when you started the policy. Typically, this extends to illnesses and conditions you were treated for, or should have been aware of, during the 12 months (and sometimes longer) before the policy started
- Some illnesses may be excluded altogether
Do you need accident, sickness and unemployment insurance?
- Yes, if the cover clearly applies to you, e.g. if you are a permanent, full-time employee in good health
- Yes, if you have no other means to repay the mortgage
- No, if you have other sources of income to repay the mortgage
- No, if cover would not apply to you, which is possible if you are a contract worker, part-time employee, self-employed or have existing health problems
- No, if you already have enough cover (perhaps through income protection insurance (IPI) or through your employer)