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Insurance

General Insurance

Overview
General Insurance is a phrase that usually means any ‘non-life’ insurance product.  General Insurance policies commonly cover things like cars, houses and offices.  In the UK, the General Insurance market is broadly divided into three areas: Personal Lines (insurance for customers’ personal needs), Commercial Insurance (insurance for business risks and assets such as offices or employer’s liability) and the London Market (insurance for specialist or unusual risks).

Personal Lines
The two most common forms of personal lines insurance are car insurance and household insurance.

Household Insurance
Household insurance is generally split into two main sections: buildings and contents. 

Buildings
Buildings insurance is normally a mandatory requirement for anybody who takes out a mortgage to purchase their home, as most lenders will insist that buildings insurance is in place before they release the mortgage monies.  Standard buildings insurance cover will usually provide protection against damage to the structure of your home from perils such as fire, floods and storms, vandalism or malicious damage and damage from falling trees or vehicles.  An analogy often used to describe what should be included under buildings insurance and what should be covered under contents insurance is this:  If you picked up your home, turned it upside down and shook it, everything that stayed within the home should be covered under buildings insurance.  It is worth noting that your home should be insured for an accurate rebuild cost and not the market value or what you paid for the property.  The rebuild cost can normally be found on the valuation report that was carried out when you took out a mortgage.

Contents
Contents insurance broadly covers any item that is not part of your home, such as goods, furniture and other valuables.  It is therefore suitable for people who rent their home or own leasehold properties (and therefore do not require buildings insurance), as well as for people who own their own house.  Contents cover would generally provide cover for carpets, electrical items and furniture and would protect such possessions from a list of perils similar to buildings insurance.  Contents cover can often be extended (for an additional premium) to provide additional cover for things such as accidental damage, Goods removed from the home (often called ‘personal possessions’), and garden cover.

Car Insurance
Card insurance is a legal requirement for anybody who keeps a car on a street, on a driveway or in a garage within the United Kingdom.  Car insurance generally falls into three categories: Comprehensive (which is generally the more expensive type), third party fire and theft, and third party only.

Comprehensive
This type of cover is usually the most desirable, depending on price, as it provides cover for damage to your own vehicle as well as damage to other road users.  Cover will usually be provided for damage to your vehicle even if the accident is your fault or blame cannot be attributed.

Third Party, Fire and Theft
This is often a popular type for younger drivers as it’s cost is usually less than that of comprehensive cover but it does provide cover required by law and cover for some key risks.  If you are in an accident that is your fault, this policy will cover the cost of repairing any other vehicles, and also for medical treatment costs or legal claims against you.  It won’t however cover the cost of any repairs required to your own vehicle as a result of the accident.  It will also pay out if your vehicle is stolen or is damaged by fire.

Third Party Only
This is the most basic form of cover and only provides the cover that is required by law.  This type of insurance  provides cover that ensures other road users are protected from any damage you may cause.

Short-term Income Protection and Mortgage Payment Protection
These two types of insurance are commonly taken out to guard against certain “financial shocks” such as a ‘breadwinner’ losing their job or being unable to work because of an accident or a serious illness.  You can usually ‘mix and match’ which perils are covered by this insurance, so for example you could take out ‘unemployment only’ cover.  It usually provides regular payments to allow the person covered by the policy to continue meeting certain essential payments such as mortgage payments and utility bills.  It often provides a valuable financial ‘safety net’ for households who experience a ‘financial shock’, and can sometimes be the difference between maintaining mortgage payments or defaulting on a mortgage. 

Short-term Income Protection (STIP)
Income Protection insurance replaces part of your income if you are unable to work for one of the reasons covered.  It will usually pay out for a maximum period between two and five years.  The amount paid out is usually called the ‘monthly benefit’ and is related to your normal income – you can normally select cover for up to 75% of your normal income.  It is worth noting that there is often a ‘waiting period’ before payments start, and this period can often be extended to keep your premium lower.

Mortgage Payment Protection Insurance (MPPI)
This cover is broadly similar to STIP, but the monthly benefit is usually based on your mortgage payment and any associated costs rather than your income.  This means that the monthly benefit is usually smaller, so MPPI is often seen as a cost-effective alternative to STIP.

Information supplied by Source Insurance Limited - www.thesource.co.uk

If you are interested in any of Source's products please contact your financial adviser or find an adviser here

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Landlord Insurance

It is highly recommended that landlords take out specific insurance for any properties they let out. A standard home buildings and contents policy won’t provide any cover for some of the risks that landlords face, such as loss of rent, damage to your property or contents by the tenant or your liability as a landlord.

In a recent survey carried out on behalf of an insurer, it was estimated that up to 40% of landlords have incorrect or, in several cases, no insurance in place…….
 
The main elements of a typical Let Property Insurance policy are:
 
Buildings Insurance
Buildings insurance covers the structure of the property against insured perils. Cover can be placed on an ‘all risks’ basis, or on a defined perils basis which is more limited in its cover.  It is worth noting that the buildings MUST be insured on an accurate rebuild cost, not on market value or the price you paid for the property.  Quite often the re-build value can be lower than the market value, and the insurer will only pay up to the rebuild value of the property even if you have insured it for more (and paid additional premium). You should be aware that your insurers will pay out less than the value of you claim if you under-insure your property or your contents.
 
Contents Insurance
If a landlord provides furniture, fixtures and fittings for tenants, these should be covered under the contents section of the policy. Importantly, this section does not provide cover for the tenants own contents - they should insure these themselves on a separate policy.
 
Loss of Rent Insurance
If an insured peril leads to the property becoming uninhabitable for a period, you will have a subsequent loss of rental income which can be covered under this section.
 
Tenant Default Insurance
This section can be added to many policies to insure against a tenant fails to pay their rent.  You will usually need a formal tenancy agreement in place to take advantage of this cover.
 
Legal Expenses Insurance
Provides cover for legal fees associated with your rental property. Cover can include debt recovery, unpaid rent and tenant evictions.
 
Property Owners Liability Insurance
Protects you against claims made by a third party (such as a member of the public or a tenant) where your property has caused injury or damage, such as a roof tile falling and hitting a car. 
 
Employers’ Liability Insurance
This is a legal requirement if you employ anyone. This provides cover in case an employee is injured in the course of carrying out their duties.  The standard limit is £10m.
 
Terrorism Insurance
 An automatic exclusion under any landlord insurance policy, Terrorism insurance is separately available to cover potential losses that might arise due to terrorist activity.
 
Unoccupied Property
From time to time a rental property may become vacant.  When this happens, it is imperative that you advise insurers immediately. It is standard market practice that cover will be reduced at this point, and there will be an inspection warranty applied to the policy insisting the property is inspected regularly. Failure to advise the insurer of unnoccupancy will undoubtedly lead to any claim being disputed and unlikely to be paid.

Information supplied by Source Insurance Limited - www.thesource.co.uk

If you are interested in any of Source's products please contact your financial adviser or find an adviser here

Source