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The guide to insurance after redundancy

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What’s covered in this guide?    

Life insurance Over-50 plans Medical Insurance Making a PPI and/or redundancy insurance claim

Please note; the resources provided in this guide are for informational purposes only and you should seek professional advice from an independent financial advisor before making a commitment. (Use our IFA directory to find a qualified financial expert in your area) When redundancy strikes; insurance is one of those things that will more than likely slip your mind. Increasingly employers shell out for a number of different policies for their employees and so it really is important to get your insurance policies in order as quickly as possible after redundancy because the day your employment comes to an end is the day your cover ceases.

Life Insurance Many employers offer life insurance or some sort of death in service cover. The minute you cease to be an employee of the company, you are no longer covered which means you now need your own policy. Don’t feel jealous of your excolleagues however because death in service cover isn’t all it is cracked up to be; it typically offers a payout of between 2 and 3 times your annual salary which for those individuals, who bought property in the boom times, probably won’t even cover their mortgage! Life insurance should be on your first to-do list after redundancy (see Plan b for more things for your to-do list). We can guide you through the basics of life insurance and how to find the right policy for you. Don’t leave it to the state to take care of your family after you are gone because the standard bereavement payment that your spouse or family may receive (and that’s if you qualify) will be a maximum of £2000 which is hardly going to last long and probably won’t even cover your funeral expenses. (C) Copyright All rights reserved.

No matter what age you are, it is worth making smart financial decisions in contemplation of your likely inheritance tax (IHT) liability. If the value of your estate is likely to exceed £312,000 (based on current rates) your family will face an IHT bill. You can buy a life insurance policy specifically to cover these costs. IHT planning can be very complex so ensure you find an expert using our IFA directory. <link> Many couples rely on joint income from both partners to cover the repayments (and other household expenditure), so it's sensible for each of you to take out life cover to provide protection for the other.

What to look for in a life insurance policy Cover your mortgage and other debts When it comes to covering a mortgage (which for many people will be the biggest debt they ever take on), it is wise to take out what's known as a level term assurance policy. This type of insurance provides you with a cash lump sum, if a claim is made within the set period of time you choose (the term). If for argument’s sake your mortgage is £200,000, which you'll repay over a term of 25 years. In this case, you might choose a 25-year level term assurance policy with a sum assured of £200,000. This means you'll receive £200,000 as a cash lump sum, should you or your partner need to claim on the policy at any point over the next 25 years. This can be an expensive form of life insurance because a level term policy will provide a fixed lump sum whenever your claim is made during the term. If you are looking to keep the cost of life insurance down, you might consider a decreasing term assurance policy instead. A decreasing policy is specifically designed to provide cover for a debt which reduces in size over time, such as a repayment mortgage. A decreasing term assurance plan will always pay out just enough cash to cover the outstanding mortgage at the point a claim is made but doesn’t leave any surplus cash to cover any other debts (as would occur with a level term assurance policy). An increasing term assurance policy is obviously the opposite of this; as time goes on, your level of cover increases. This might sound like a strange concept but it actually makes financial sense; you tend to get wealthier as you get older and it makes sense to get more cover because A) you can probably afford it with comfort B) your spouse and family have become accustomed to a certain lifestyle and C) once you take into account inflation, it is probably essential to ensure the amount your family receives goes up rather than down.

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You can normally choose whether the cover is increased in line with inflation or by a fixed percentage each year. Many people opt for a decreasing term assurance policy with what’s known as guaranteed insurability option which gives you the right to increase cover after a key event in your life for example a new child or getting married. Assurance Type Level Term Decreasing Term

Advantages Fixed amount Cheaper

Increasing Term

Increasing amount to account for inflation and income increase

Disadvantages More expensive Decreasing amount, so no surplus to cover other debts Can be expensive

Cover your family You have two options when it comes to covering your family financially in the future. You could take out an additional level term assurance policy to cover your income however many families find a large lump sum difficult to manage. The alternative to a lump sum when you die is known as a family income benefit. This provides your family with an income for the duration of the term. If you want to provide your family with an annual income of £20,000 for the next 20 years, you'll need to insure yourself for £400,000. It is important to realise that if you make a claim 10 years into the policy then your family in total will only be receiving £200,000 i.e. £20,000 per year for 10 years. Money-saving tip – If you have already factored your mortgage into your life insurance policy (through a level or decreased term assurance policy) remember to subtract this from your family’s expenditure calculations because the mortgage will be repaid so their monthly outgoings will be lower than they necessarily are now – you don’t want to be over-insured! Family Income Benefit

Level Term Assurance

Advantages Regular income, no lump sum to cope with

A fixed amount, you know how much you will be leaving for your spouse or family

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Disadvantages Amount family receive (i.e. value for money) decreases as the policy term expires. Some families find it difficult to manage a lump sum

What about critical illness cover? This cover offers a lump sum payable on the diagnosis of a serious illness or disability. The way most critical illness policies works is that if you survive the diagnosis for more than 28 days you will receive the sum assured as a tax free lump sum and quite handily the money is yours to keep even if you make a full recovery. The illnesses covered vary from policy to policy but the most common diseases covered are cancer, most types of heart disease including heart attacks. Organ transplants are also normally covered, as well as kidney failure, loss of sight or limbs, Alzheimer's disease, pre-senile dementia, coma, etc. Many insurance companies will also automatically include cover for your children (to help with medical expenses and time you have to have off work) although this only covers a limited range of illnesses. Always read the details of your policy thoroughly before agreeing to critical illness cover because most insurers will charge an extra premium for this additional cover and not all policies cover your health as comprehensively as each other.

Where to get your life insurance cover Consult an IFA The best way to ensure you have the right level of cover at the right price is to consult with an independent financial advisor (IFA). Please consult our IFA directory if you are looking to

Use a comparison service <Insert some affiliate links>

Try these websites for a quote <Insert some affiliate links>

How to be smart with your life insurance cover Opt for two individual policies You and your spouse should both have a life insurance policy in place, now is as good a time as any to ensure you are both sufficiently covered.

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A joint life insurance policy won't give either of you as much cover as two single policies. A joint policy will only pay out once - when one person dies. Whereas two single policies will pay out twice - when each of you dies - so in effect, you're getting double the protection. This is likely to be important if you want to leave a nest egg for your children. Obviously buying single policies will work out slightly more expensive than a joint one, but it is something worth considering.

Put your life insurance policy into a trust If your policy isn't written in trust it will automatically become part of your estate and this means it will be subject to inheritance tax. But if it is written in trust, it won't form part of your estate and is more likely to be exempt from inheritance tax. Ensuring your policy is held in trust will also speed up the process of getting cash to your family because they wonâ&#x20AC;&#x2122;t have to wait until probate is granted (as they ordinarily would if the policy formed part of your estate).

Be honest If you are a smoker then it is absolutely vital you inform your life insurance provider of this fact. If you were to die of a smoking related disease but you hadnâ&#x20AC;&#x2122;t declared this when you took out the policy then you (or rather your family) could face having the claim rejected and all that money would have been wasted.

Even if your spouse doesnâ&#x20AC;&#x2122;t work they should have life cover Your spouse may not earn an income but the contribution they make to the household in terms of childcare etc can be immense (and expensive to replace if they should die). If the worst were to happen, it could mean the remaining parent has to give up some of their own work commitments to help with the financial burden of household duties. This is why it is essential you are both covered whether or not your partner is in employment.

Get the right level of cover Be over-insured and you are spending more cash each month than you need to but being underinsured is just as risky as having no life insurance. It is important you take out enough cover to pay for not only your mortgage but any other debts and financial obligations you might have. See below for our guide on calculating how much life insurance you need

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How to determine how much life insurance cover you need Believe it or not there is a science to determining how much life insurance cover you need. (Feel free to print this sheet out and fill in the details to work out how much cover you need or click here to download this table in MS Excel format) Costs in the event of your death Outstanding mortgage Other outstanding debts Funeral expenses Total one-off payment required

Amount £ £ £ £

Your spouse’s and or families’ immediate financial requirements Living expenses Child care costs + school fees Motor expenses Hobbies and interests Other expenditure [ ] Total immediate financial requirements


Your spouse’s current income Shortfall (net difference between spouse’s income and the outgoings) Number of years you need to cover Total shortfall (shortfall x number of years)

£ £

Your assets Saleable assets Other life insurance policies Shares, bonds and other investments Any other assets [ ] Total assets Total financial shortfall (one off payment + ongoing financial requirement) Deduct total assets Total life insurance cover required

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£ £ £ £ £ £


£ £ £ £


How long do you need life cover for? •

Cover yourself until retirement age (currently 65 years of age)

Cover yourself until your children are no longer financially dependent i.e. they reach 18 years of age

Cover yourself until you've calculated you will be debt free; in particular, cover yourself until the end of your mortgage term.

Your life insurance should be regularly reviewed, this is because events like;     

Moving house Starting a family Having more children Getting a new job Taking on extra financial obligations

Will have an effect on the amount of cover you require. Even if you already have a life insurance policy in place, it can be worthwhile reviewing the details of the cover to insure you have the right amount in place.

Are you over 50? It might be worthwhile to consider an over 50 plan which guarantees to pay out a cash lump sum when you die. This type of cover can help towards funeral expenses, outstanding household bills or simply as a nest egg for children or grandchildren. Most policies of this nature have similar terms and conditions including:      

You must be aged between 50 and 85 You must be a resident of the UK There is no medical or health questions – guaranteed acceptance If you make it to your 90th birthday you will be covered for FREE for the rest of your life. If you die in the first 2 years, many providers will pay back all your premiums, plus half as much again. Be warned however that depending on how long you live, you could end up receiving less than you paid into the plan.

Visit LV 50 Plus for more information

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Medical insurance Private medical cover is now practically a given in nearly every job (provided you work for a medium to large employer). When you get made redundant, cover for yourself and your family disappears and we all know how quickly all those consultant and hospital visits can add up and how long you have to wait if you need medical treatment on the NHS. Private medical insurance is a good way to cover you and your family. According to insurance experts, the claims ratio on private medical insurance is nearly 77% which means that if a policy were to cost £100, the insurer would pay out on average £77 per policy. That definitely makes you realise how handy health insurance can really be. There are four main types of private medical insurance:    

Cash plans Dental Cover Private Health Cover Healthcare deposit account

Cash Plans A health cash plan provides limited cash sums towards everyday healthcare bills. Different policies cover one or a combination of healthcare such as dental care, optical care, physiotherapy, or stays in hospital. So for example a policy will pay out a maximum of £100 per year towards optical care bills you have incurred, and £10 for each night you need stay in hospital. Some policies have age restrictions and will only cover you if you are under a certain age (often 65). If you've had health problems in the past (pre-existing conditions), the cash plan may not pay out on certain types of healthcare. Similar to most types of insurance; some providers apply qualifying periods which means that they will not pay out towards any treatment undergone in the first few months of the policy. Who provides cash plans? There are a plethora of insurance providers to choose from, here are three of the main providers: (C) Copyright All rights reserved.

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Bupa Healthcare Simply Health Aviva

Dental Cover Some private medical insurance, for example a cash plan, will cover dental expenses however many forms of private health cover do not cover for everyday medical expenditure such as dentists. Even on the NHS you will have to pay for any dental work you have done; A basic check-up, including scale and polish, costs £15.90, while a check-up plus any fillings, will set you back £43.60. More complex procedures such as crowns, bridges and dentures are likely to cost upwards of £190. And that’s if you can find an NHS dentist in your area! Many dentists now accept only private patients and that is certainly a conscious business decision given that if you have dental work done privately, charges can exceed £50 for a check-up and £100 for a filling, while a crown could cost between £400, and a bridge £800. Many insurance providers offer a standalone dental insurance plan and it is something that you might consider taking out. They can be expensive but when you put that expense into perspective, private dental treatment is very expensive and you are more than likely to claim so it is worthwhile weighing this up. You might also consider a capitation plan for you and your family which is usually arranged through your dentist and will involve a check-up of your oral situation and then a monthly retainer based on the assessment which will cover you for any consultations in the future and reduce the cost of any dental work you need doing. Remember that capitation plans rarely cover the entire cost of the treatment but rather reduce the cost so be sure to factor this into your decision. Most experts recommend that you go for a cash plan (information above) this is because it applies to a wider range of health costs including glasses and contact lenses, physiotherapy, maternity and hospital stay, as well as dentistry. So you are likely to get more value out of a cash plan.

Who provides dental cover? There are a plethora of insurance providers to choose from, but here are some of the main providers:  

Simply Health Tesco Finance

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Denplan – slightly different offering in that it is more of a dental health scheme whereby you must use one of their ‘member dentists’ (see their website for more details) Dencover

Private health cover Your private health/medical insurance policy will pick up the costs of most in-patient treatments (tests and surgery) and day-care surgery, and some extend to out-patient treatments (such as specialists and consultants). The amount of cover you receive varies wildly from policy to policy and so does the amount you pay. Largely speaking the following will not be covered: 

You can't take out cover now for treatment you know you're going to need.

If you've had health problems in the past (pre-existing conditions), your insurer may also exclude those conditions from your cover.

It does not cover the treatment of chronic medical conditions.

Some exclude certain types of treatments such as out-patient treatments, routine treatments (such as health checks), dental care or experimental treatments.

Most also exclude routine pregnancy, HIV/AIDS, fertility treatment, mental or psychiatric conditions, and elective treatments you may choose to have, such as cosmetic surgery. Most cash plans offer a contribution towards the cost of labour and some offer a cash lump sum when you have a child.

Many policies have a standard excess charge which tends to be the first £50 or £100. Private health cover can be purchased in two forms; cover based on a full medical underwriting which means you have a medical examination or simply moratorium which means you get to avoid the medical examination. You tend to get cheaper premiums if you go for the full medical underwriting option but if you decide to don’t want any questions asked about your health, any conditions you have had for the last 5 years will automatically be excluded and failure to disclose these may result in your policy being declared void. Many providers will allow you to customise your plan to suit the needs of you and your family. Features of private medical cover can include:

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Diagnostics Hospital charges Specialists/consultant fees Operations Outpatient services up to a certain level Private ambulance Psychiatric treatment Heart and cancer cover (not usually included as standard) Accommodation expenditure Medical treatment at home

Naturally the more comprehensive your cover the more your premium is likely to be. It is a highly competitive marketplace so be sure to shop around in order to get the best deal. Many private health insurance providers will reward you for leading a healthy lifestyle so if you are already a member of a gym you may receive a discount and if you aren’t you may be able to get a discount through your insurer.

Who provides private health cover? There are a plethora of insurance providers to choose from, but here are some of the main providers:    

Bupa Aviva AxaPPP Simply Health

Healthcare deposit account This type of health insurance is almost a hybrid of private medical cover and a cash plan in that your premiums are split 75-25 – with 75% being used the operate your plan and 25% going into a deposit account which can act as a top-up for any additional medical expenses. National Friendly is currently the only provider of these type of cover and they offer to fix your premiums for 5 years and through the use of the deposit account offer you cover for the first 10 years. They allow you to choose any UK hospital whether private or NHS. A healthcare deposit account plan will cover you for:   

Surgical operations Consultations Physiotherapy

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Cancer treatment Heart surgery Acupuncture Diagnostic investigation Homeopathy Chiropody Ambulance fees NHS hospital payments up to 10 overnight or day case stays

Unsurprisingly it doesn’t cover you for any pre-existing conditions or any cosmetic surgery. These types of plans don’t include dentist or optical treatment. The great thing about a policy of this kind is that the top-up fund is yours so you can withdraw it if you don’t use it. Cover starts from £40 per month for adults and £20 per month for children and gets relatively proportionately higher depending upon your age and health.

Before you take out private medical cover 

Consider what your risks are. Is it worth the price you're being quoted? How much will it cost you in extra charges if you have an accident or illness which isn’t covered? If you are largely concerned with the health risks when you go abroad then private medical cover for the UK perhaps isn’t necessary because many travel insurance policies offer comprehensive cover. Consider just saving the money, that way if you don’t fall ill, you have the cash to spend on something else - although it is worthwhile remembering that many medical problems are very expensive.

The main types of medical cover summarised Type of plan Cash Plan

Advantages Covers more than just ‘what if’ medical procedures including dentists and opticians.

Disadvantages There are annual limits to your claims and some don’t offer complete cover of your medical expenses

You can start claiming right away

Many claims are subject to an excess

Many allow you to use Claims are paid your cash plan to pay for retrospectively other medical expenses such as physiotherapy and chiropody (C) Copyright All rights reserved.

Standalone Dental Cover

Private Health Cover

Healthcare Deposit

Private dental care is expensive and you will claim on it at some point Varying levels of cover but many will offer to cover the complete cost of medical expenditure.

Can be very expensive

Can be a cost effective way of getting treatment in private facilities

Many don’t include outpatient requirements, dentistry or expenses at the opticians.

Offers access to fast medical treatment because you can go private rather than wait to be seen through the NHS Many medical expenses are covered Top up account provides you with cash if you don’t need to use it for medical expenses

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Can be expensive Many have a number of exclusions

Doesn’t include dental or optical treatment Can be expensive with cover starting from £40

PPI and redundancy/unemployment insurance OK so you may have missed the boat if you are reading this and don’t have either of these things but don’t worry because we are recommending you don’t ever purchase these types of policies. The PPI or payment protection insurance market is currently being investigated by the FSA for reasons of mis-selling and overpriced policies which provide extremely limited cover. Redundancy cover is another type of insurance which is considered a rip-off by many. The cost of the premium in relation to the actual cover offered is often high. However if you have already purchased either of these types of cover then of course now is the time you are going to want to use them. Redundancy insurance conditions Conditions of your policy will vary but the following conditions are likely to apply:     

You will have to have been in continuous employment for more than 6 months You will only be covered for 50-60% of your income You will only normally receive payouts for 12 months You must have been made redundant voluntarily You are likely to have to wait for up to 60 days to start receiving any money

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A guide to the types of insurance after redundancy