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Most of the time, things happen when we are least expecting them. Unfortunately, a lot of these things cost us, or lose us, money that we haven’t planned or budgeted for.

 

Redundancy, Accident & Critical Illness

Redundancy, accidents and illness are some of the biggest causes of lost income. So, it is very important to have your income protected in advance of any of these things happening. There are a few different options you can take to do this.

Income Protection Insurance

IPI will pay an income in the event that an accident or illness prevents you from earning by carrying out your normal occupation. Many insurers also offer this kind of protection to people whose main responsibilities are at home, i.e. looking after children. This is because, although there is no loss of income, costs may be incurred – for example, child care.

The premium paid  will depend mainly on your occupation. Lower risk (cheaper premium) occupations include accountants and civil servants where as higher risk (higher premium) occupations include manual labourers. Some occupations will be excluded from IPI all together as they represent too great a risk.

IPI is also referred to as ‘permanent health insurance’ as the insurer cannot cancel the policy unless you fail to keep up with the premium payments or you take up a dangerous job or hobby.

How are Benefits Paid?

There must be a deferred period between the start of the illness or injury and the point of which the benefits start to be paid out. If you’re self-employed, you may want to opt for a shorter deferred period so the benefits are paid out sooner. However, if you work for a company who pays sickness benefits, you may wish to opt for a longer deferred period and match it to the date your employer’s sick pay ceases. The longer the deferred period, the cheaper the premium.

Benefit levels are set so you can’t receive a higher income than you would if you were working. The maximum amount payable is usually between 50% and 60% of your usual earnings. Benefits will be paid proportionately if you are still able to work but less, or in a lower paid job, than you were before the accident or illness.

ASU Insurance (Accident, Sickness and Unemployment)

ASU insurance can be considered as an alternative to income protection insurance. The difference is that ASU insurance is typically used to just cover your mortgage repayments if illness, an accident or unemployment leads to a loss of earnings. When you make a claim, a level of benefits will be paid out which are equal to your mortgage repayments for a limited time – usually a maximum of two years. Lump sums may be paid out in some situations – like, death, disablement or the loss of a limb.

Critical Illness Cover

As the name suggests, this type of cover protects you in the event that you get a critical illness. You will be provided with a tax-free lump sum in order to cover any additional costs of being in this situation or if you are unable to earn a living.

The range of illnesses covered will depend on the insurer, but typically, the following conditions will be covered;

  • Heart attack
  • Stroke
  • Most forms of cancer
  • Major organ transplant
  • Kidney failure
  • Multiple sclerosis

Typical uses for critical illness cover include;

  • Long-term care – either at home care or in hospital.
  • Any alternations to living accommodation required.
  • Medical equipment.
  • Mortgage repayment in the event your are unable to earn a living anymore.
  • Enhancing general quality of life.

Death in the Family – Paying for a Funeral

Unfortunately, even in the worst times, there are still finances to sort out and various costs to cover which, in most circumstances, you weren’t expecting or planning for.

Nowadays, the average cost of a funeral is between £3,000 and £4,000. If the deceased person didn’t have funeral insurance/cover, or didn’t leave any money in their estate to cover it, then the family will need to cover the costs.

However, if you are on a low income and receiving certain benefits there is government scheme, Funeral Payment, that could help you.

Funeral Payment – Government Scheme

If you are on one of the following benefits, you may eligible for the Funeral Payment scheme;

  • Income Support
  • Housing Benefit
  • The disability or severe disability element of Working Tax Credit
  • Pension Credit
  • Universal Credit
  • Child Tax Credit
  • Income-based Jobseeker’s Allowance
  • Income-related Employment and Support Allowance

This scheme wont usually cover the whole bill so it’s likely that you will have to pay for some elements of the funeral yourself. Also, you will normally have to pay the money back if you receive any money from the deceased person’s estate.

However, Funeral Payment can help to pay for the following things;

  • Burial fees
  • Cremation fees – including a doctor’s certificate
  • Travel/transport to the funeral
  • The cost of moving the body within the UK
  • Up to £700 for other funeral expenses, such as; coffin, flowers or the funeral director.

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You have six months from the date of the funeral to claim from this scheme.

Claiming from the estate

If the estate of the deceased person is large enough, you may be able to claim back the costs of the funeral. Secured debts, such as mortgages and other secured loans will be paid from the estate first, but funeral costs can be paid before other unsecured debts like credit card loans.

Before you offer to pay for the funeral, it will be worth checking first whether you will be able to claim the costs back and, if so, how much money is available.

Paying from the deceased person’s bank accounts

In some cases, the deceased person may have left money in their bank account to cover funeral costs.

As the bank or building society usually freezes the accounts of those who have passed, you may need the help of the administrator or the executor to access the account(s). However, you don’t necessarily need their help if you can provide a death certificate, an invoice of the funeral costs with your name and proof of identity.

The bank can pay the funeral bills directly to the company providing the service.

Collapse of a Bank or Financial Provider

If you end up in the awful position of your bank collapsing, or another financial provider you deal with goes bust, you may worry that all of your money is lost forever. However, there are ways to have your money returned if you end up in this situation. 

Financial Services Compensation Scheme

This scheme is in place to pay out compensation to people who end up losing money because their bank or another financial provider has gone bust. It will also help you in situations where you have received bad financial advice or your provider committed fraud against you.

Compensation Limits:
  • Banks and Building Societies: £85,000 per person, per authorised bank or building society. This figure is increased to £170,000 for joint accounts.

  • Credit Unions: £85,000 per person, per firm. This figure is increased to £170,000 for joint accounts.

Banks, Building Societies and Credit Unions can all protect temporary high balances of up to £1 million for up to six months. This is because certain events could have caused a temporary high balance in your account, examples include; property transactions, inheritance,  or a claim for compensation for an injury or unfair dismissal from your job.

Vehicle Breakdown or Accident

Breakdowns and accidents can happen suddenly when we are least expecting them to happen. So, this is something very important to be prepared for, especially if you rely on your vehicle for work.

Vehicle Insurance (accidents)

If you have any kind of vehicle that you drive on public roads, then it is a legal requirement to have at least third party insurance.

With vehicle insurance you pay a premium, either upfront or split into monthly instalments, which is used to cover the cost of repairs or replacement vehicles if you are in an accident. The premium is determined by several factors, including but not limited to; your age, value of the vehicle, previous driving history (previous insurance claims and driving convictions), where your vehicle is kept and what you use the vehicle for (just social, or social and commuting).

If the accident was your fault, your insurance company will pay out and you will be liable to pay an ‘excess’ amount, normally about £100 - £600 depending on your circumstances. This amount is outlined before you take out the insurance policy, so it is important to make sure this is an amount you can afford. If the accident wasn’t your fault, the third party’s insurer will be liable to cover the costs and you will pay nothing.

There are three types of vehicle insurance you can take out, however, fully comprehensive insurance is strongly advised, and often cheaper.

Fully Comprehensive

Fully comprehensive insurance gives you protection for damage to your own vehicle (repair costs or equivalent funds to the value of your vehicle if it is written off and you need a replacement), fire, theft, and any damage to third party vehicles or property in the event of an accident. Most fully comprehensive policies will also cover for; personal injury, windscreen damage (chips and scratches), personal possessions stolen from your vehicle or damaged in an accident and driving other vehicles (not on your insurance policy).

Third Party, Fire and Theft

Third party, fire and theft insurance will provide financial cover for damage you cause to other road users, but will not cover the costs of any damage caused to your own vehicle in the event of an accident. This policy will also cover loss or damages to your vehicle caused by fire or theft.

Third Party Only

This is the lowest level of cover you can get to legally be able to drive on public roads in the UK. This policy will only cover third party vehicles and property, and nothing of your own costs, in the event of an accident. Some third party policies will also compensate passengers that were in your vehicle at the time of the accident for any injuries suffered.

Breakdown Cover

Another important product to have with owning a vehicle is breakdown cover. Breakdown cover is there to help your vehicle breaks down, for example, your battery dies or you puncture a tyre, which means you won’t be left stranded on the road, unable to move your vehicle.

You can either choose to have ‘personal’ or ‘vehicle’ breakdown cover. ‘Personal’ will cover you in any vehicle, whether you are the driver or the passenger, as long as it meets the requirements stated in you policy. ‘Vehicle’ allows you to cover a specific vehicle – this is often the cheapest option.

What does breakdown cover include?

This can vary depending on the company you use and the policy you take out. However, most breakdown policies will generally include;

Roadside Assistance

Your provider will send out a mechanic and recovery vehicle. The mechanic will try to repair the vehicle roadside, if they can’t, they will tow it to a nearby garage.

Vehicle Recovery and National Cover

This will allow you to choose any garage or location for your vehicle to be towed to if it can’t be fixed roadside, rather than to the closest garage.

At-home Breakdown

This will cover you if your vehicle breaks down at home, or a short distance away.

Onward Travel

This will give you additional options of getting to your desired destination. This could include, courtesy vehicles, overnight accommodation or public transport.

Depending on what you want out of your breakdown cover and how much you are willing to pay, more example of what can be included are; key replacement, battery replacement, tyre replacement, cover if you fill up with the wrong fuel, special vehicles (like caravans and motorhomes) and European breakdown cover.

If you don’t have breakdown cover in place, there may be some companies willing to help you, but you could end up paying a fortune. Some breakdown companies may not help you at all.

Injury or Illness of Pets

If you have pets that are a part of the family, it is important to have cover in place for times when they are injured or fall ill.

Pet Insurance

You can get pet insurance for dogs, cats, rabbits, horses, birds and other exotic pets likes reptiles, tortoises or parrots.

What does pet insurance include?

This can vary depending on the company you use and the policy you take out. However, most pet insurance policies will generally include;

Vets Bills

This is one of the biggest benefits of having pet insurance as vets bills can be in the thousands of pounds, depending on the injury or illness. Some insurers also include dental care and treatment.

Death of your Pet

Pet insurance will cover the costs if your pet dies, or has to be put to sleep by the vet, due to an illness or injury. It’s important to note that this cover may cease once your pet reaches a certain age.

Lost and Found Cover

Your policy may pay out the price of your pet if they are stolen or go missing (stray). In this case, you must report your lost pet to the police with most insurers paying out if your pet isn’t found with 30 days of being reported. Some insurers may also pay for advertising your lost pet, including any reward given to the person that finds them.

Third Party Liability (for dogs)

This will cover you in the event that you dog causes damage to a third party’s property or cause an incident which leads to injury to a third party.

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