Life Assurance

No one really wants to spend much of their time thinking about dying or becoming seriously ill, the majority of us hope and expect to see ourselves living a long life in good health, raising our families and watching them have their own children, however death or illness can strike at any time anywhere and no matter how much we try to prevent it we can`t stop it. However, everybody can take measures to prevent financial difficulty. Whether you require Life & Critical Illness Cover or Just Accident, Sickness & Unemployment here at First Choice Finance we offer a wide range of protection products using a carefully selected panel of insurers in order to give you the best options. Our experienced advisers will talk you through the options and present you with the cover that best suits you and your circumstances, therefore tailoring a policy to your needs and not just offering you a one size fits all policy.

Life Cover – What is it?

If no other protection is taken then this is the one plan everyone should have. Life Cover is an Insurance protection policy designed to ensure that your family and loved ones are provided for in the event of death or Terminal Illness diagnosis. The policy is designed to pay out a Tax Free lump sum to your loved ones so that they can pay off the mortgage and perhaps other debts and not run the risk of losing the family home giving both you and them the peace of mind that they are financially secure when you are no longer around.

Life Cover – Who Qualifies?

The majority of people qualify for Life Cover and unlike most Insurance policies the younger you are the more cost effective the policy is. Generally speaking customers who require the cover the most are deemed to be at their Financially most vulnerable i.e. have a young family, a mortgage and other debts whereby if they were to lose an income coming into the household that would have a major effect on being able to maintain their commitments and lifestyle. However, even if you don`t fit that scenario it doesn`t matter, everybody`s circumstances will dictate a need for some level of protection.

Life Cover – What types of cover are available?

• Decreasing Term Life Cover

This type of cover is most commonly used for customers who have a mortgage on Repayment (Capital & Interest). The policy initially is set to cover the mortgage amount at the time of taking the policy out and the term matches the remaining time on the mortgage. As the mortgage goes down in value the policy will go down in line with it, therefore guaranteeing to pay the mortgage in full in the event of death. Decreasing term is seen is the 1st step on the protection ladder as it`s usually the most cost effective cover in terms of premium amount.

• Things to Consider

Although decreasing will pay a lump sum in the event of death and is designed to clear off the debt in full these policy tend to have a maximum interest rate in which they will cover up to (typically 8%) therefore should the mortgage rate exceed this amount the cover may decrease quicker than the mortgage balance and not provide a sufficient lump sum to pay the debt in full. Decreasing term isn`t always the best option for family protection either. Due to the nature of the policy the chances of a claim being made earlier in the policy a less than towards the end and therefore the policy will be worth less towards the end of the term.

• Level Term Life Cover

Level Term Insurance or Level Life Cover is designed to pay out a Lump sum in the event of death or Terminal Illness. The amount of cover you choose to insure yourself for at the start of the policy will stay exactly the same until the policy term comes to an end. This type of policy is usually put in place for people who have Interest only or Part and Part Mortgages where there is always a fixed capital balance at the end of the term; however they are also used to provide Family Protection by paying a lump sum to loved ones in the event of death. This cover can be taken out to cover the Mortgage and provide Family Protection or as a stand alone Family protection policy to run alongside other policies. In addition it also makes the perfect `Top Up` policy if there is a shortfall between a new mortgage and existing plan.

• Things to Consider

If you want to keep things simple then 1 policy to cover the mortgage and family protection is an option, however this can work out more expensive. By tailoring the policy, at First Choice Finance we think that it sometimes pays to separate the policies between mortgage protection and family protection as this often gives you more protection value and can sometimes be more cost effective. Level term is not always the best option for people who have a repayment mortgage as they tend to be more expensive than the equivalent decreasing term.

• Increasing Term Insurance

This type of cover protects you for a given term for an increasing level of benefit. The amount of life cover chosen at the outset rises annually by a specific factor, normally Retail Price Index (RPI). This is known as `indexation`. The premium will also increase. By selecting indexation you are protecting the long term values of the plan by protecting it against external factors which could affect your plan values such as inflation.

• Who Qualifies?

Anyone who qualifies for Life Cover will qualify for increasing term Insurance and the option of this cover will be discussed between you and your advisor at First Choice Finance at the point of application. This policy may be more suitable when looking at family protection as will ensure the plan earns more benefit the longer it is in place for.

Critical Illness Cover

• What is it?

Critical Illness cover is a policy that is designed to pay out if you are diagnosed with a specified Critical Illness for example Cancer. The policy is designed to pay off all or part of your Mortgage and therefore ensuring that whilst going through such a difficult time your financial concerns are taken care of. The Policy can be used to pay off debts such as a Mortgage or simply to help with health care or improving your quality of Life whilst you recover. Cancer research statistics currently show 1 in 3 people will contract some form of cancer in their Lifetime and although we all believe it won`t happen to us by taking preventative measures now we may just secure our future.

• Who Qualifies?

Nearly everybody will qualify for some form of Critical Illness protection and the amount you choose will be determined between you and your advisor at First Choice Finance. Critical illness, like Life cover is based around age, therefore the younger you are the more cost effective the policy and as you get older the more expensive it can become, so its probably better to have it place sooner rather than later.

• Critical Illness – What types of policy are available?

Critical Illness can be combined either with your Life cover or as a stand alone policy. The majority of customers who have Critical Illness plan normally combine it in one policy; this is known as `Life or Critical Illness` the idea behind this policy is that whether you were to become critically ill, diagnosed terminally ill or just pass away the policy will pay one lump sum that covers the event. The policy can be in Single or Joint names and can be taken as either a Level or Decreasing cover.

Instead of the above you may also opt take out a standalone policy which can run alongside any existing Life Cover or just instead of Life Cover, the idea behind this is that you may not want to fully cover your mortgage or you may just want to have a lump sum that equates to an annual income, whatever your preferences First Choice Finance will help you get the cover you require.

Whether you choose Level Term, Decreasing or Standalone cover here at First Choice Finance we work with a select panel of Insures that we believe offer some of the most comprehensive policies on the market at affordable rates. Our Insurers will cover you for a wide range of Critical Illnesses and in addition some will include extra cover benefits such as Childs Critical Illness protection which will pay out a specified lump sum in addition to your cover should the worst ever happen to you or your child.

• Things to consider

Although Critical Illness plans pay out for a wide range of illnesses they won`t cover every type of illness and they do have to be of a specified severity and meet the insurer`s definitions and conditions. In addition these are not policies that payout if you are off work with a non specified illness or made redundant. Critical illness can also be expensive especially if you plan on covering the full mortgage amount. In addition if you hold a joint Life & Critical Illness cover and a claim is made the policy will only pay out once. Therefore should a claim be paid out and then you or your partner pass away or diagnosed with another Critical Illness the policy will no longer be valid as it has paid, therefore you should explore the possibility of holding separate policies.

Income Protection

• What is it?

Formerly known as permanent health insurance (PHI), long-term income protection (IP) is an insurance policy that pays out if you are unable to work due to injury or illness. Income Protection usually pays out until retirement, death or your return to work, although rarely now available at a lower cost. Income Protection doesn`t usually pay out if you`re made redundant, but will often provide `back to work` help if you`re off sick. Most people believe that if they are off work they can claim help from the government and will get support through benefits. Although this can be the case most people would only qualify for a benefit between £99.15 - £105.05 per week and even that depends on your personal circumstances, in addition your employer may only pay you full pay for 3 – 6 months and then half or no pay thereafter. This plan unlike other protection plans is geared towards protecting household income rather than providing capital into household and doesn`t just pay for a short period of time like an Accident, Sickness & Unemployment plan.

• How Much do I get Paid out?

Income protection typically pays out between 50 – 70% of your Gross income. The policy pays out a tax free monthly income. Generally there is a pre determined period between the point of a valid claim and the payout which is known as the deferred period. The deferred period is determined at application and is influenced by various factors including how long you get sick pay for from your employer. When we set your plan up we will have already pre determined the term of the pan (usually the term of your mortgage or retirement) and therefore a claim can be made at any point during this term. The Policy will pay you an income until you are able to return to work

• Who Qualifies for Income Protection?

Whether you are employed or self employed, most people between the age of 17 & 70 qualify for income protection although the cut off application age for most providers is 60 years old. The term is flexible and can also be also be Index linked ensuring your policy runs in line with external factors that can affect you benefit such as Inflation. Income Protection can be taken as a Single or Joint cover and makes the perfect policy for people who may have been considering Critical Illness cover but found it to be too expensive as these policies can sometimes work out more affordable and makes the ideal stand alone policy to run alongside Life cover.

• Things to consider

The policy is only designed to pay out if you are ill, injured or disabled and not if you are made unemployed, in addition when applying for the policy a Health Check has to be completed with the insurer and they may refuse to pay out for `pre-existing conditions`. The insurer will pay for any condition that meets their criteria but may require further medical assessments upon claim. In addition some Insurers may not pay if you are proven to be able to work at your current occupation but in a different role. Due to the amount you are covered for and the long period of time the policy can pay out for, it can be an expensive option. The policy will cease upon death, therefore if any mortgages or debts remain in the event of this there won`t be protection provided for these.

Homeowner Secured Loans 9.8% APRC. Representative example: Borrow £50,000 over 180 months. 60 months at 8.1%, £497.83 pcm fixed at 60% LTV. Then 120 months at 10.1%, £539.89 pcm variable. Total payable £94,656.60. Total cost of credit £44,656.60 (including: £795 lender fee, £985 broker fee & £42,876.60 interest). First Choice are tied to certain loan providers.

Mortgages & Remortgages 8.4% APRC. Representative Example: Borrow £120,000 over 25 years at 5.99%, £778.86 pcm fixed for 3 years at 60% LTV. Then at 8.75%, £974.86 pcm, variable for 22 years. Total payable £286,416. Total cost of credit £166,416 (including: £985 broker fee, £999 lender fee & £164,432 interest)

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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. Security is required on immovable property.

Late repayment can cause you serious money problems. For help, go to moneyhelper.org.uk

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