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The Life Insurance Market
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Currently, if you take out a mortgage or a loan the person or organization arranging it for you will suggest you need Payment Protection Insurance (PPI) to protect yourself against unemployment, sickness and death. If you have a mortgage it is wise to have some form of insurance to protection. But is PPI the best product on the market?
A PPI policy will pay your mortgage repayments; generally it will pay out for a 12 month period. But what about other bills and living expenses? How would you cope?
Another name for this type of policy is Accident and sickness cover, with optional unemployment cover. But what happens if you’re off work for longer than 1 year or you can’t work again?
With most insurers, an income protection policy will pay out 50% of your annual salary, tax free. You can have this policy in place up until retirement age, some insurers offer cover up to age 70.
So why opt for a policy that just covers your loan or mortgage payment each month and only pays out for a maximum of 1 to 2 years?
My advice would be to speak to an adviser to discuss your needs and ensure you have the right policy to cover you and your family.
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Decisions about what type of life policy to purchase should not solely be made on the basis of price, but the policy that is the most suitable for the client’s needs and expectations. Judging policies solely on price can lead to mis-buying.
If comparison website, for example, added extra value, such as offering advice on a wide range of products and companies, then that would be a worthwhile and add value, but very few do this. Also their ‘one-size-fits-all’ approach may not fit with each insurers' own underwriting process, so the premium could change when customers apply for cover.
Customers should be offered the option to write their policy into trust, as they are with any good IFA, which is free and simple to do and saves tax problems at claim time. This is the type of advice that all protection companies who sell direct to the public, whether they are a price comparison site or phone-based, should be promoting.
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