Types of Assurance

Whole-of-Life

Whole-of-life assurance, offers protection for your lifetime until your eventual death, whenever it occurs, and therefore premiums are much higher. This type of contract normally includes an investment element which has a direct impact on future premiums. This is because with these type of policies the policy can be set up so that the premiums are reviewed in the future (which in most cases will result in an increase from the initial premium.

With-Profit whole-of-life policies

This type of contract includes an investment element, so that the pay-out on death is the sum assured, plus any investment profits that may have been added.

With-profits plans aim to smooth out the peaks and troughs of stock market volatility by retaining investment returns built up in good years so that payments can be topped up in bad years. Bonuses are intended to be added yearly to the basic sum assured – with a possible final bonus being paid at the end of the term. Though there is no guarantee that bonuses will be added.

Income Protection

Income protection pays out if you’re unable to work due to sickness or accident.  It pays out if you’re unable to work due to sickness or accident. It pays out until retirement, death or your return to work, while short-term income protection pays out for a set period, usually between one and five years.  Income protection normally will pay out if you are made redundant.

Payments are based usually on a percentage of your earnings. Payments are normally tax free. Income protection policies only pay out once a pre-agreed period of incapacity has passed (known as the deferred period).

As a general guide the longer the ‘deferral’ period selected, the lower the premiums.

Types of Income Protection Policy

Long-term income protection policies pay out until a fixed age, death or the policy holder returns to work.

Types of Long-term income protection:

• Guaranteed –  Premiums won’t go up unless you increase the level of cover
• Reviewable – cheaper at the commencement of the term of the policy
• Age-related – The premium is cheaper, but goes up by a pre-agreed amount each year as you get older

Payment Protection Insurance (PPI)

Payment Protection Insurance was designed to cover debt repayments if you were unable to work, via an illness, accident or redundancy. Unfortunately many PPI policies have been mis-sold.

If you are not sure if you have a policy, check your paperwork that was issued when you took out e.g. your loan or credit card. If you’re still not sure, you will need to contact your provider and enquiry if you have PPI.

Due to the recent mis-selling of the policy various companies have been set up to deal with such complaints (They will charge you a percentage of your final PPI settlement as a fee, which can be very excessive), however there’s no need to use them. You can either deal with the complaint your self or we can assist and will only charge a maximum of only £250. And that is only if we are successful in securing a settlement.

Please note at Bond Financial Limited we do not provide advice on this product but will be able to recommend a firm that deals with these products.

Mortgage Payment Protection Insurance

This type of policy is designed to cover your mortgage payments if you’re unable to work due to accident, sickness or unemployment. In exchange for a monthly premium, MPPI pays you a set amount each month, which could be for 12 or 24 months

Please note at Bond Financial Limited we do not provide advice on this product but will be able to recommend a firm that deals with these products.

Private Medical Insurance (PMI)

Private Medical Insurance (PMI), or more simply ‘health insurance’.  This pays for private treatment if you fall ill, e.g. essential treatments, including surgery and consultations and hospital care.

There are two main types, referred to Fully Underwritten and Moratorium. Fully Underwritten policies require you to disclose full medical history which ensures what will be covered and or not.

Moratoriums exclude all pre-existing conditions. This type of plan is usually cheaper. One of the advantages of PMI is that it allows you to receive fast-track consultations and private treatment. This can be carried out either in a private hospital or NHS hospital.

Medical Insurance from your Employer

Many employers offer PMI as an optional benefit to staff. PMI from your employer can offer much better value than buying it yourself. For a start, your employer will often pay the premiums for you, although you’ll have to pay income tax on the value of the benefit.

The other main advantage of employer-provided PMI is something known as ‘free cover’. When you buy a PMI policy yourself, you usually need to go through medical underwriting and pre-existing conditions will be excluded from cover. Many employer-provided schemes will cover you for pre-existing conditions and you will not have to go through medical screening when you sign up for the cover. This would though be treated as a benefit in kind on which you maybe taxed.

Reviewable Policies

A “reviewable policy”, can be renewed after a 10-year period ends, though premiums could rise substantially to ensure the policy will be able to pay out the expected lump sum.

When working out whether the premiums need to rise, the insurance provider will look at the way in which the underlying investments have performed up to that date, as well as taking into consideration your circumstances, for example health and life expectancy.

If a policyholder is unable or unwilling to increase the amount they pay for cover, they can either cash in the policy, or accept the policy will provide a smaller sum than they had anticipated at the outset.

Only “non-reviewable” policies have fixed premiums which will not change over time, but these premiums are likely to be more expensive, at least initially, than the premiums you will pay for reviewable cover.

Family Income Benefit

This type of policy will pay out a monthly income of an agreed amount each month from the date of the claim to the end of the policy term. As the insurer would, in total, pay out less than with a level term insurance plan, the premiums are lower. But this type of policy would not enable you to clear a debt such as a mortgage

Decreasing Term Assurance

This is the most simple type of policy offering a fixed and predetermined benefit at the outset.

The vast majority of protection policies, particularly Term Assurance are non-profit but this should be differentiated from savings policies because, although some Term Assurance contracts do have an element of investment within them the investment returns offered are often poor.

Critical Illness Cover

This policy is designed to pay a lump sum to the policyholder if he / she is diagnosed with one of the covered serious illnesses.

While most terminal illnesses are covered within these types of policy some illnesses which are covered do not necessarily have to be terminal to be claimable.

The idea of this sort of policy is to provide the policyholder with a lump sum at a time when they may need it most and may be experiencing higher than normal costs because of the illness they are suffering.

Obviously the list of illnesses covered will vary between companies and Bond Financial Limited will advise you on the best policy to suit your individual requirements. Typical types of illness that are covered will include:

• Heart Attack
• Stroke
• 
Most forms of cancer
• Major organ transplant

Other benefits such as payment of a sum assured on death or disability cover may also be included with these sorts of policy and the good news is that benefits from a serious illness contract are tax free.