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A good dental insurance policy can make your smile brighter
Dental insurance is a type of insurance in which the beneficiary and the policy provider agree on a plan in which the policy provider pays for the dental services used. This dental service can be from the dentist, dental hygienist or any other...
Buying Auto Insurance (Part 2 of 4)
Continued from Part 1- (Part 2 of 4) 11.Personal Injury Protection (PIP): Covers the treatment of injuries to the driver and passengers of the policyholder's vehicle. At its most extensive, PIP can cover medical payments, a part of the lost wages of...
Insurance Glossary ot Terms
Assured - Those insured under the terms of an insurance policy. Benefit - The money paid to the policyholder when a claim is made. Bid Price - The selling price or cash-in value of your unit holdings. Bonus - Relates to a with-profits...
Insurance providers weather the storm while the claims of consumers flounder
We have just had the first year’s anniversary of the flash flooding which occurred at Boscastle in Cornwall. The floods saw some of the worst damage wrought by sudden rainfall in the UK for many years. The flood was caused by the remains of a...
What You Need To Know About A Car Insurance Adjuster?
If you're in need of a car insurance adjuster then there are a few facts you should know before you meet with him/her. The first rule of thumb is that if your car insurance adjuster is over friendly remember, he is there to save money for the...
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Life insurance – wise investment in personal finance or excessive caution?
Life insurance is typically taken out to offer valuable financial protection for your family in the event of your death, upon which a payment is made to your financial beneficiaries, heirs or family members. The extent of this payment will depend on your insured sum and earnings. Life insurance and life assurance may be interlinked in advertisements, though bear in mind the two policies are different. Life assurance is a form of financial protection which is also an investment, as you should always get a pay-out at the end of the term of the policy. Life insurance on the other hand is simply financial protection for your family, avoiding the issue of debt in the event of your death.
According to an article by the Fair Investment Company, the British life insurance industry shrank to almost half the size of the pensions industry last year and according to the Association of British Insurers, less than 50% of UK households hold a life insurance policy.
In their most recent newsletter about this issue, the Association of British Insurers found that 25% of mortgage holders had insufficient life insurance to cover their debt. The ratio of new life insurance policies to new mortgage loans was apparently 68% in 1994, but by 2004 this had dropped by half to 33%.
The absence of mortgage life coverage poses a serious risk for the dependants of homeowners. If banks were to embark on wide scale repossessions as a result of this absence of life insurance, this would impose a risk on their loan books and reputations. The Association of British Insurers also state that one of the main reasons behind the increased gap between mortgage loans and insurance is the emergence of people remortgaging their property to take advantage of equity release through a rise in value, without insuring their borrowing. In their report it was stated that around 63% of new mortgage loans were remortgages or further advances, compared to 34% in 1994. Egg reported at around the same time,
that three out of four of these new loan homeowners had no intention of insuring this additional debt. This is particularly worrying if couples are remortgaging their property later in life – towards retirement, given that should anything happen to the breadwinner, the partner would be left with significant debts without the capability of paying the loan back.
Reasons for the downward trend in life insurance take-up include:
* Relaxation in lending policy – increased competition in the mortgage market means that lenders are not forcing life insurance policies on their customers
* High house prices have stretched homebuyers, in particular first time home-buyers, in terms of their mortgage repayments, that the additional costs of a life insurance policy are deemed too expensive
* There are more households with no dependents
If you’re interested in researching a life insurance policy, make sure you shop around. UK websites such as moneynet ( life insurance ) provide life insurance and life assurance information guides, as well as providing price comparison research for the different products. In the states, the website LowerMyBills.com also offers a similar service.
Because of the various factors listed above, people have also become less familiar with the term life insurance and without the awareness there is little recognition of the importance of this type of insurance. However as speculation increases that UK households are not coping with their debt, so should the awareness of life insurance as an essential product in the personal finance portfolio.
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About the Author
Rachel writes for the personal finance blog Cashzilla:
http://www.cashzilla.co.uk
Rachel is a disillusioned, disaffected and broke graduate, exploiting new media for financial therapy. ;-)
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