Insurance
A mortgage is usually a considerable commitment. Your home really is at risk of being repossessed if you fail to keep paying the mortgage. We strongly suggest that you implement adequate financial protection in the event that your health deteriorates to the extent that you cannot work and therefore meet the monthly costs of your mortgage.
There are three basic types of financial protection
1. Life Assurance
This simply pays a defined lump sum of money upon the death of the person covered by the policy. Normally a specific policy is arranged to meet the size of the mortgage (cover) and the life of the mortgage (term). If you have a partner, are married or have dependants this prevents your family from being required to continue the mortgage or sell the property. If you are single, life assurance would repay the mortgage and enable your home to pass to your chosen beneficiaries smoothly, enabling them to inherit the property and decide what to do with it in their own time rather than being forced to sell the property irrespective of the property market conditions at the time.
2. Critical Illness Cover
This can be added to life assurance or set up as a completely separate type of cover. In essence the cover pays a lump sum to you if you are diagnosed with a serious illness - such as cancer. The point being that you have adequate cover to fully repay your mortgage, thereby alleviating your financial pressures whilst being seriously ill. The terms and conditions of this sort of cover vary considerably between Insurance companies, so it is vital that if you have this sort of cover that it would actually pay out for a legitimate claim. Please note that some Insurers offer to cover HIV if contracted through a needlestick injury. in the event of a claim you will need to prove that you followed standard guidelines for Doctors regarding reporting your needlestick injuries. If you don't do this, then we would suggest that a claim would be difficult for an Insurer to view favourably.
3. Income Protection
Nearly all doctors will have a basic income protection policy - it's possible that you still have the cover that you were persuaded to buy at your graduation ball. You need to review your cover. In essence a policy should fit in-line with your Trust's employee benefits (these can vary between Trusts) and the NHS Ill Health Pension Scheme. The cover pays out if you are unable to work and continues to pay up to about 65% of your income until you are better (and able to return to work) or retired (60 for most doctors in the NHS). Again, the terms and conditions are important - you want the policy to pay out if you cannot do your job, not just any job - or even any job for which you are suitably trained within the vast field of healthcare.
Accident Sickness & Unemployment Cover (ASU)
This sort of cover is rarely useful to doctors, yet most lenders sell it as a standard part of their package. You may have it if you have a mortgage already.
ASU tends to simply pay your monthly mortgage payments. You normally buy the cover in "chunks" of £100. In general a claim would start after 3 or 6 months and remain in payment for 1-2 years or until you are well again (whichever is soonest). So the cover is specific to your mortgage, but not your other commitments. Income Protection is a far better type of cover - it also tends to be cheaper per £ of cover. Perhaps more importantly, very few doctors are actually made redundant. So we believe that for the vast majority of doctors there are far better alternatives to ASU.
As Independent Financial Advisers we are able to provide advice to you on these products - simply contact us to discuss your requirements. Don't forget that we arrange these policies without commission. Check our main site www.solomonsifa.co.uk