However, a barrier stopping some from taking out financial protection is the view that insurance companies do not pay out or that they will find any excuse not to honour the claim. But is this actually true?

In reality, this is an unfortunate case of fake news and a worrying myth that is preventing some borrowers from having these important financial safeguards in place.

Do insurance companies pay out on protection?

The latest annual figures from the Association of British Insurers (ABI), show the protection industry paid out 98.3% of new claims in 2023, totalling more than £7.3 billion. This is a 14% increase in the total value of claims paid compared to 2022.

Furthermore, individual policies such as life insurance, critical illness and income protection saw a 14% increase in the total value of claims.

How do different protection insurances compare?

• 5% of critical illness claims were paid, with the value of claims averaging at £68,354
• 7% of life insurance claims were paid, with an average claim value of £80,403
• 32% of income protection claims were paid, with an average claim value of £22,270pa

So, with insurance companies paying out more than £20 million per day in 2023, we can definitely say that the myth of insurers not paying out or honouring claims is fake news.

Why would an insurer not pay a claim?

Given the strength of the data, it is hard to know why such a misconception exists. This is especially true as the data from the ABI continues to trend upwards each year.

Of course, there are cases where an insurer is unable to pay out on a claim. As part of its research, the ABI revealed that the main reasons for not honouring a claim is policyholders not accurately disclosing their medical history or habits when they took out the policy, or the claims not meeting the policy definitions.

How can we overcome this? It’s really important to be open and honest with your mortgage adviser when discussing financial protection. Whether it’s answering lifestyle questions honestly or disclosing pre-existing conditions or health concerns, this allows your adviser to pair you with the right product and provider. It also means the provider can fairly assess your application on accurate information.

Is it too late?

If you have thought that the myth of insurers not paying out was true, the good news is that it is never too late to put some protection in place. A financial adviser is best placed to run through all the options available and provide choices that suit your individual needs and your budget.

Best of all, your adviser will review with you regularly to make sure those products are still suitable and continuing to meet your needs. This is particularly useful if your situation changes during the life of the policy – such as a new job, your family grows or your health changes. Plus, they can help you make the most of any inclusive services (such as counselling, remote GP services or physiotherapy sessions) or even help make a claim if needed.

While we all may expect to pay our mortgage every month, the truth is that life is unpredictable. Whether it’s our health or something else, all could throw a spanner in the works and leave us in a difficult financial position. In those challenging moments, protection insurance can offer a solution and real peace of mind. If you’re renting, buying or remortgaging it’s never been so important to have that conversation and put that financial safety net in place for you and your family.

Talk to us to explore your protection options and we can tailor a plan that meets your specific needs and circumstances.

Call 020 7317 7311 or email info@chapelgateprivatefinance.com

With Storm Kathleen about to hit parts of the UK, extreme weather events and powerful storms are becoming more frequent and intense in the UK. Homeowners may be increasingly concerned about the potential damage their properties may face. Fortunately, many home insurance policies include coverage for adverse weather as a standard feature. However, it’s crucial for homeowners to review their policies regularly to ensure they have the right cover for their needs.

Understanding Standard Cover
While home insurance policies generally cover a broad range of weather-related perils, it’s essential for homeowners to review the specifics of their coverage. Standard features often include protection for structural damage, damage to personal belongings, and additional living expenses if the home becomes uninhabitable due to adverse weather.

Additional Considerations
Despite the inclusion of weather-related coverage in many home insurance policies, it’s crucial to consider the limitations and exclusions that may apply. For instance, escape of water cover may only cover the damage caused by a pipe that has burst due to freezing and may not cover the repair of the pipe itself. It’s important to be aware of any limitations and take steps to fill potential gaps in coverage.

If you are a renter, you will need contents insurance to cover damage to your belongings like clothes and electronics if there is a flood from heavy rain fall for example.

Steps for Homeowners:

1. Regular Policy Review: Schedule regular reviews of your home insurance policy to ensure that it adequately covers the risks associated with adverse weather events.
2. Understanding Exclusions: Pay close attention to policy exclusions and limitations related to weather-related damage. Consider purchasing additional coverage if needed.
3. Mitigation Measures: Implement preventive measures to minimize the risk of weather-related damage to your property. This may include reinforcing roofs, installing storm shutters, and ensuring proper drainage around your home.
4. Communication with Insurer: Stay in communication with your insurance provider. If you live in an area prone to specific weather risks, discuss your concerns with your insurer to ensure that you have sufficient coverage.

As extreme weather events become more commonplace, having adequate insurance coverage is crucial. While many home insurance policies now include standard coverage for adverse weather, it’s essential to stay vigilant, regularly review policy terms, and take proactive measures to protect your property. By staying informed and prepared, you can weather the storm with confidence and peace of mind.

With the rise in the cost of living and borrowing, many people are worried about paying the bills if anything happens that leaves them unable to work. Recent surveys have shown that the average UK family doesn’t have enough in savings to be financially secure for long if they’re no longer receiving an income.

What is critical illness insurance?

Critical illness insurance pays a one-off, lump sum if you’re diagnosed with a condition or disability that is covered by your policy. It covers a set number of years and can be offered as extra coverage when you apply for life insurance. You can choose whether you want the payout to rise over the course of the term (so it keeps up with inflation) or the opposite – decreasing because you aim to cover something specific like your mortgage.

How does critical illness cover work?

Certain illnesses are covered as standard by most insurers, including, some types of cancer, heart attack, stroke, organ failure, multiple sclerosis, loss of arms or legs and Alzheimer’s and Parkinson’s disease. Some providers may allow you to add additional illnesses to your policy, which you’ll pay more for. Your children could also be covered as part of your policy so ask your adviser about these options if it’s something you’re keen to have in place.

Although a critical illness diagnosis can mark the start of a claim in some policies, others may only begin to offer protection once your illness hits a certain level of severity. It’s important to work with a financial adviser when reviewing a policy and all the small print before you commit to make sure you are aware of areas not included.

An adviser can help you figure out the best approach to your life insurance plan and any other coverage you need for you and your loved ones.

What is life insurance?

Life insurance pays an agreed lump sum to your loved ones (or any other beneficiaries) when you die. The terms of the amount paid out are set when you buy your policy. Life insurance is there to help ensure your family has financial security during a difficult time without you and to give you the peace of mind that they will be able to continue to pay the mortgage for example.

1. Term assurance

Runs for a set number of years and a payout is made if you die during the term. Once the term comes to an end, coverage also ends, so if you die after the end of the term, there is no payout.

2. Whole life insurance

Carries on for as long as you are alive and will pay a lump sum when you die. Whole life will cost more in premiums than term life, and you will keep paying the premiums on your policy throughout your life, to stay covered.

3. Employee life insurance

Check with your employer to see if you are covered by employee or group life insurance (also known as a death-in-service benefit) as part of your contract. This coverage usually pays between two and four times your annual salary.

“Life insurance pays an agreed lump sum to your loved ones (or any other beneficiaries) when you die.”

Get in touch

We can help you understand how critical illness cover and life insurance helps to provide financial security for you and your family. Please get in touch to arrange a time to chat, telephone 020 7317 7311 or email, info@chapelgateprivatefinance.com

How does income protection provide you with some peace of mind if the unexpected happens?

With the rise in the cost of living and borrowing, many people are worried about paying the bills if anything happens that could leave them unable to work. Recent surveys have shown that the average UK family doesn’t have enough in savings to be financially secure for long if they’re no longer receiving an income.

What is income protection?

Income protection insurance pays out a percentage of your monthly income if you are unable to work due to illness, an accident or disability. It gives you a buffer between finding yourself without an income, paying the bills and protecting your family’s security. Building an emergency fund for yourself is a good start to give you some financial backup, but income protection insurance can provide additional peace of mind.

How does income protection work?

Income protection is an insurance policy, so you pay a monthly or annual premium for it like any other type of insurance.
If you can’t work because of sickness, disability or other reasons (depending on your policy criteria), you’ll receive a regular income until you either return to paid work, retire, pass away or the policy term comes to an end. Policies can also be set up to pay benefits for shorter terms (1, 2 or 5 years), which could be cheaper. Income protection is different to life insurance or critical illness cover, both of which do not pay regular amounts but instead give you one-off lump sums in the event of your death or the diagnosis of a critical illness. That’s why it’s important to get advice if you are thinking about getting coverage.

“It’s important to get advice if you are thinking about getting coverage.”
Have you thought about later life planning?

Meeting the costs of care for elderly parents and yourself when the time comes is important to plan for. Your financial adviser can help you explore options that could work for you.

These could include:

• Releasing equity from your property
• Establishing an investment portfolio or building on an existing one
• Downsizing your home
• Lifetime care insurance if you’re over 60.

“Your adviser can help you choose the income protection policy that suits your needs.”

Did you know?

The max income protection benefit any provider offers is approximately 60% of gross pre-disability income. Premiums cost more if the waiting period is shorter and the percentage of your income is larger.

• Income protection can give you some financial resilience, especially as statutory sick pay is only £109.40 per week (at November 2023), and may only be paid for 28 weeks.

• Your adviser can help you choose the income protection policy that suits your needs, weighing up how much your premiums might be with the amount of coverage you’re after.

Get in touch

An adviser can help you figure out the right way to protect your income.

Please get in touch to arrange a time to chat, telephone 020 7317 7311 or email, info@chapelgateprivatefinance.com

Underinsured
If you don’t regularly review and update your policy, any pay-out you do receive from your claim may not be enough to cover you and your family’s needs if you were to die or if you are unable to work due to illness.

Say you took out a life insurance policy covering you for a certain amount. After several years, you may have children, resulting in a move to a larger house. If you take a larger mortgage; your monthly outgoings would increase, and you would have bigger bills to pay. Therefore, the lump sum paid out to your family upon your death would no longer be sufficient to sustain their lifestyle and might leave them facing financial hardship.

New policies offer better protection
Like any industry, the insurance industry has evolved over time. Modern policies can offer you better protection and more extensive cover.

When comparing a critical illness policy sold in 2007 with one sold in 2017, the more modern policy may have better claims wording, provision for part-payment and other advantages.

If you have simply been paying your premiums on the same policy for years, it is likely that, as well as facing the risk of being underinsured, you also won’t be benefiting from the kind of comprehensive cover offered by today’s policies.

Let us protect you
With so many different types of protection insurance on the market, it’s not surprising that many people just stick with the cover they have.

It may not be the best cover for them. We can assist you in finding the very best policies for your circumstances, so you have the peace of mind that you, and your family, will be protected should the worst happen.

Please note: Older policies may cover illnesses which modern policies do not. Premiums may be cheaper due to the age of the policy. Certain cover may be excluded on a new policy due to pre-existing conditions.

Always get professional advice when reviewing your insurance policies.

As with all insurance policies, conditions and exclusions will apply

Joint life policies can be put in trust, however for the purpose of a mortgage it’s not a usual process.

If you have a joint life, first death policy, the benefit is automatically paid to the surviving party. However, if you have a single life policy, placing it into trust will help mitigate Inheritance Tax and will also ensure monies pass quickly to the chosen beneficiary.

Let’s use an example of how a trust could help. Our client has a single life policy and dies after 9 years into a 25 year term. The Life Cover (Sum Assured) of £499,000 is paid out from the insurance company on production of the death certificate and the value is then held in the Estate until Probate has been granted.

Probate is the process where all of the assets are calculated (including this life cover), less any lifetime gifts and gifts to charity and the total value is then offset against the IHT nil rate band, currently £325,000 in tax year 2019/20. (For the sake of our example, let’s assume this person is single as there are other considerations to be made for married couples). Probate is not a quick process and can often take months, sometimes even years, so in the meantime, there is still a mortgage to pay.

Writing this policy into Trust will ensure the life cover is paid directly to the chosen Beneficiary / Beneficiaries. By placing a life policy into Trust means it falls under the lifetime gift rules, so may be subject to a potential Inheritance Tax (40% in tax year 2019/20) if death happens within 7 years. In year 8, any proceeds will be free of any Inheritance Tax.

There are many different types of Trust we can use. A Discretionary Split Trust, sometimes referred to as Flexible Trust tends to be the best one to place a mortgage life policy into. This type of Trust is very flexible and you can change the Trustees and Beneficiaries at any time, as many times you’d like, which means it can change as your life alters.

Placing an asset into Trust is a legal document and once a life policy is in Trust, it cannot be taken out. We would advise you to seek professional advice before entering into such a plan.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

Some providers will want you to survive a Critical Illness for a certain period of time, however there is a provider who will potentially pay out on production of a consultant’s letter.

All the classic Critical Illnesses are normally covered, for example:

• Cancer (excluding less advanced cases)
• Heart Attack
• Cardiomyopathy
• Stroke
• Liver Failure

Are you aware of some other standard definitions which are covered?

• Deafness (permanent and irreversible)
• Dementia (resulting in permanent symptoms)
• Multiple Sclerosis
• Blindness (permanent and irreversible)
• Third degree burns (covering 20% of the body)

For an additional premium, it’s possible to cover you for extra, less severe Critical Illnesses, for example:

• Coronary angioplasty
• Less advanced cancers i.e. cervix, lung, testicular
• Less advanced cancer of other sites – with surgical removal
• Skin cancer

Taking a critical illness policy is arguably more important than life cover as it’s something you personally benefit from. Having such a policy can be a godsend, it can provide you with options at what could be a very worrying time, for example, avoiding a need to rush back to work too early or allowing you to make structural changes to a property in the event of a permanent disability.

Obviously, life cover is also important, and we will discuss all aspects of your protection to ensure your needs are met.

‘image: www.freeimages.co.uk’

However, insurers also provide a range of additional benefits you’re highly unlikely to be aware of, so we’ve listed some below:

• A support service which offers an independent team of counsellors, advisers and legal experts

• Free counselling sessions, this isn’t just available at claim stage.

• A doctor’s service which means you can speak with the following medical professionals.

o Remote physiotherapy
o Remote psychological services
o Discounted health MOT
o Mental Health Support

• Carers of children or the elderly with a disability can access specialist support through workplace options.

• Bereavement Counselling with 6 face to face or telephone sessions from a qualified counsellor.

• Mental health counselling for individuals or the whole family.

• Nurses support services.

o Treatment, coping strategies and bereavement
o Second medical opinion
o Mental Health Support
o Carer Support
o Help at home after a hospital stay
o Eldercare

• Lifestyle discounts such as:

o Discounts on gym membership.
o Discounts on certain foods to encourage healthy eating.
o Discounts on hotel’s, spa’s, flights

Your advisor will talk you through the additional benefits offered by any insurer recommended.

(‘image: www.freeimages.co.uk’)

Lots of variables can affect your ability to get insurance, so if you’ve already had health issues, you may find it increasingly difficult to get life assurance, if at all.

Here are some examples of the cover we have sourced:

• A client had a heart attack and then 2 stents fitted – this person was offered life cover with a premium loading of 125%. Now you may argue this is expensive, however its only as expensive as the need to have the cover. This particular client had been declined elsewhere, so to be offered life cover was great news!

• A client has a cancer diagnosis and survives it. Ordinarily this type of illness would mean any form of protection would be declined straight away. Again, we’re confident we can get cover. Each case needs assessing individually, and it depends on the severity of the cancer (to what TNM staging it’s received).

• Mental Health is a real issue and very much talked about now, which is positive news. If someone has had previous mental health issues and attempted suicide, again it would normally be declined. We can access life cover with a 12-month deferment. So, what this means is we can get life cover to start after 12 months.

• The most extreme case an acceptance was issued on a client who needed protection and they’d recently received a lung transplant. This particular client didn’t proceed with the cover in the end, however it was offered.

So, as you can see, anything is possible

Level Term Assurance. This pays out a lump sum of money (chosen at application stage) for a specified period. The amount of life cover payable doesn’t change throughout the term. This type of plan is normally used to protect an Interest only mortgage or could be used for dependant protection. There is no investment value with this type of cover.

Decreasing Term Assurance. The is commonly used to protect a capital and interest mortgage (sometimes known as mortgage protection). The amount is designed to repay the mortgage outstanding and to do this we need to make some assumptions. We assume a notional mortgage rate of 8% which means as long as the mortgage rate you’re paying doesn’t go above 8% for the whole of the mortgage, there should be enough life over to repay the debt on death within the term.

Another type of decreasing term assurance is known as Family Income Benefit. This is aimed at dependent protection and is normally used to pay an annual amount of money after death within a specified term.

There is no investment element within a decreasing term assurance policy.

Increasing Term Assurance. This is the same as Level Term Assurance, however the value and premiums increase each year to ensure the value of the cover isn’t eroded by inflation. It can be increased by a fixed percentage of 2%, 3% or 5% or by the Retail Prices Index (RPI).

Whole of life Cover. This does exactly what it says and will pay out on death, regardless when it happens. There are a few different types of whole of life policies, some have a notional investment element, others are just purely premium driven. This type of cover tends to be the most expensive as it will definitely have to pay out at some point.

An example of when a whole of Life policy would be required is when there’s a need for protection for the whole of someone’s life, for example if you have a dependant who has a disability and will always need support. This type of cover will always pay-out.

Also, a whole of life policy can be used to help plan for any potential inheritance tax liability. It is advisable to consider placing these types of policies into trust to ensure you are not increasing any potential Inheritance tax liability.

Critical Illness Cover. This type of protection will pay out a lump sum if you were to suffer and survive a major illness such as cancer, stroke, heart attack etc. Each provider has various different conditions they can cover you for, however most offer between 35 – 40 core conditions. Critical Illness cover is basically like having life cover – it will pay out a lump sum of money but without you dying.

You can have a standalone policy, or more commonly, it tends to be linked with life cover. Again, you can have different variations of the cover, so you can have decreasing, level and increasing cover.

Income Protection, or otherwise know as Permanent Health Insurance. This type of protection pays a regular income to you if you’re unable to work through long term sickness, illness or disability. If you’re employed, your employer may pay you for a period of time. Once they stop paying you, the Income Protection policy starts – this is known as a deferment period. Income Protection is very different to critical illness cover as one pays a regular income if you’re off sick and the other pays a lump sum of money if you suffer and survive a major illness.