Accident, Sickness & Unemployment cover
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Please read this section, it could save you a fortune!
The most important thing that these policies provide you with is at least one of, if not the most important thing that anyone with a mortgage (or rent) needs, which is your all important cashflow. When a tenant has lost their cashflow and can't pay the rent they can eventually get evicted and that is bad enough. As a home owner, the situation is similar but there is considerably more at stake.
As a homeowner, you won't need me to tell you that the effect of repossession of one's home could be both emotionally and financially devastating. But bare with me for a moment and consider what I am about to say because I want to offer a perspective that you may not have fully considered. Anyone who has owned a home for say 5-years or more will appreciate that their house is a highly valuable asset to them. Of course there have been occasional years when house prices have fallen, but over enough time, values increase, and so therefore does your equity in your property. So for sake of argument, if you own a £150,000 home today, even with a lowly average yearly rise in house prices of 6%, your home would be worth £268,627 after 10 years. So you would have an additional £118,627 equity, free and clear in your home with no tax to pay on your gain. That is without doubt a very valuable asset don't you think?
So, apart from the fact that your home is where you live, from the perspective of your personal wealth, that asset needs to be protected at all costs since in a very tangible way, you could say that your home is a sort of goose, that over the years to come, will lay golden eggs for you. So if you were temporarily struggling to pay your mortgage, to keep it safe, you might ask your lender to suspend the capital payments and just pay the interest until things picked up. There are other options but let's run with this one for a moment. Let's say your interest rate is 7% and say your mortgage balance is £80,000. What you would need pay your lender to keep them happy and keep your home safe (and your existing equity), is £467 per month. Add in say £15 to £30 for your insurance and we could call it £500 a month for good measure in total. Now, what are you achieving if you can cover that £500 until you get back on your feet? You keep your home and, importantly, your equity because remember, you could lose a major part of this equity depending on how much or little your house sells for under forced sale conditions (even without a falling housing market) plus costs etc. if your lender goes for repossession. But that's not all you will achieve, because you are preserving your future wealth as well and using the above example, a further £118,627 in addition to the equity you have already accrued.
So there is more at stake here than meets the eye and perhaps that you have considered if you were unfortunate enough to loose your job. And here's the kicker. Do you know how much it would cost you to ensure that you could pay that £500 mortgage payment for up to 12 months (if you were out of work for that long) and thus protecting this most valuable asset? About £16 per month! That's right. That's all it costs! Actually, it wouldn't even cost you that much in your first year since your first 3 months are free anyway! How simple and cheap is that?!
But wait a moment, in fact the £118,627 is nowhere near the full picture because that's conservatively what it could be worth in 10 years time but let's extend that to 25-years since this is the typical length of time that people take out their mortgages for. A property worth £150,000 now, will be worth £643,780 (again assuming an average house price growth of just 6% per year). As I said, quite an asset and to help protect it, you just need to protect your cashflow, and at the very least to be able to make the mortgage payments. That is exactly what you can achieve with one of these policies and as you can see from the above figures, a small investment into protecting your cashflow of only £16 per month, will really go a long way don't you think? It literally could save you a fortune! Of course these policies prevent you from missing mortgage payments which protects your long term credit record, but as I said, there is considerably more at stake than meets the eye.
Accident, Sickness & Unemployment cover, shortened to ASU or known also as mortgage payment protection, is designed to provide you with an income to pay your mortgage or rent and some additional outgoings if you're unable to work due to an accident, sickness or involuntary unemployment. Whatever your circumstances, be it a home owner or a tenant, there is a suitable policy for you and we can match the policy to your specific needs. Policies are available to both the employed and the self-employed, which is why the term "involuntary unemployment" is used. If the term "redundancy" was used, anyone who was self employed would think that they were excluded since they don't have employers who can make them redundant!
Typically these policies pay out for a maximum period ranging from 12, 18 or 24 months and the term is selected at outset and varies with insurer and your preference. We can offer you any of these options but 12 months should, with any luck, be sufficient time to find a new job or recover and not to put too fine a point on it - will protect the roof over your head if the worst happens. The choice of course is yours as to what makes you most comfortable. Frankly, we're in challenging times to say the very least and now, perhaps more than ever, may be the time to decide whether a relatively small investment on your part outweighs the risk of such a huge potential loss, particularly given the pressures we are currently facing. No one, it seems, is immune but you can be assured that with this type of policy, you will have provided that crucial cashflow and therefore the breathing space to keep it all together if you need it.
What is covered?
With ASU cover, you can generally insure up to 60% of your current income but it is possible to insure up to 75% of your gross monthly income to a maximum, dependent on the insurer. It’s reasonably flexible, and will allow you to choose whether you would like:
· just accident and sickness cover;
· just unemployment cover;
· or the whole package of accident, sickness and unemployment.
Should you need to make a claim this type of policy will pay out after the deferred period. The deferred period is selected based on your individual needs. The longer the deferred period, the lower your investment required to provide the cover you need. It is important therefore to check what benefits that you would receive from your employer (if applicable) before deciding on the deferred period. Benefits will then be paid to you for the specified period, which as mentioned above, is usually for 12, 18 or 24 months or until you are back to work if sooner. In the example given above, we have quoted using "back to day 1" for up to 12 -months unemployment cover, so it is cheaper than quoted with a longer defferred period.
Things to watch for:
Of course there are certain exclusions but these are no more than you might expect. For instance, in the main, you will not be covered for pre-existing medical conditions or nor will you be covered in the event of redundancy that you were aware of prior to taking out the policy. That said, we have two insurer who will cover you for pre-existing medical conditions subject to a 1 or 2-year moratorium (dependent on the insurer). Full details are of course provded to you in the Key Facts Document and also stated in your policy document.
You are eligible to apply for a policy provided you have been in continuous employment for 6-months or more. Contract workers can obtain cover and if this applies to you, it's worth calling us because certain conditions do apply and we can confirm if you are eligible.
You cannot claim for the first 90 days after you have started your policy if you loose your job, so if you already know that you are going to loose your job it will be too late to get the cover. So the sooner you start your policy the sooner you get past that 3-month exclusion and get your cashflow and home protected.
Mortgage lenders will often try to persuade you to take out ASU when embarking on a mortgage or remortgage. But ASU is a standalone product and it’s definitely worth letting us quote you because we have more than just one policy to offer. When you start a policy you cannot claim in the first 3-months, so some people feel "trapped" with their existing policy even though it might not be competitive or have a lower limit of cover than they would like. The good news is that you're not trapped at all. We can arrange your cover on a new policy and likely offer you lower premiums and the new policy will waive this 90-day clause because you already had a policy in place so your cover is deemed to be continuous by the insurers. So it's really worth giving us a call.
We hope that you can appreciate just how valuable this cover can be to you by illustrating just how valuable your home is to you, but if you are in any doubt or wish to discuss this further then please call.
We offer Accident, Sickness and Unemployment Insurance from a selected panel of providers.
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