Bridging that finance gap

Bridging finance is a short term loan for a property buyer who can’t complete because of a problem in the chain behind him.

A bridging loan allows the buyer to proceed with the purchase while the other problems sort themselves out behind them.

The downside to bridging is the buyer is often left with two loans – a mortgage on the property they are selling and the new bridging loan on the property they are buying.

Banks and specialist lenders provide bridging loans. The deal is generally based on the property offered as security but the interest rates will be higher than an ordinary mortgage and the loan-to-value lower – perhaps only 70% of the value of the property.

The key to borrowing on a bridge is the ‘exit strategy’, which is how you will pay off the loan.

Most borrowers exit strategy is to replace the bridging loan with a mortgage as soon as they can.

The problem is you have to be absolutely certain you will complete the sale of your former home and have a mortgage in place on your new home before contemplating a bridge. If you are not in absolute control of both ends of the deal and cannot guarantee an exit strategy, you should not consider a bridging loan as the lender my take possession of the property if your plans fall through.

Bridging loans come in two types:

• Closed bridging is for a time limited period like a week, a month or three months – useful if the completion date for your old property is set.

• Open bridging has no time limit and often attracts a higher rate of interest.

Expect to pay fees as a percentage of the sum borrowed. You will also have to budget for paying both your own and the lender’s solicitors, a valuation and possibly a broker fee as well.

A typical bridging loan is at least 1% above bank base rate and can be much higher depending on the lender and how they view the risk.

An alternative to a bridging loan is a ‘let and buy’ mortgage. With this product, you keep your existing mortgage on your old home but tell the lender you are converting to a buy-to-let product, which may cost you a little more in interest repayments.

You let the property to a tenant and the rent you receive pays the mortgage. Meanwhile, another lender gives you a mortgage on your new home based on normal lending criteria.

A ‘let and buy’ mortgage may be advantageous because you can sell your former home at your own pace and this gives you a capital gains tax advantage because the last 36 months of ownership of a property that has been your main home is exempt from CGT when you sell.

That means providing you lived in your former home for all the time you owned it less 36 months, you pay no CGT when you sell. You can also afford to sit out any drops in the market and wait for a better price.

You also have a capital gains tax exemption on your new home at the same time.

Bridging loans are expensive, last resort borrowing and you should take financial advice and consider carefully before entering in to an agreement.

Summary

• A bridging loan is short term finance available from banks and specialist lenders

• The interest rates and fees are generally higher than other borrowing because the lender knows you have nowhere else to go

• Consider a ‘let and buy’ mortgage as an alternative as the rates are cheaper and the you pick up capital gains tax advantages

Equity release for cash-strapped pensioners

Many pensioners are forced to live off limited pensions and savings despite owning mortgage-free homes worth well in excess of £100,000.

They are victims of the classic asset rich/cash poor financial trap as they cannot raise a conventional loan or mortgage because they are too old or have no income, but have valuable bricks-and-mortar security to offer a lender.

Traditionally, mortgage lenders will let people aged up to 75-years-old borrow, providing they have an income to repay the loan.

As medicine and science increases longevity and people are living well in to their nineties, more and more pensioners are forced to live on dwindling savings and a small pension.

One way of solving the problem is an equity release plan – also called a lifetime mortgage, a reversionary mortgage or home income plan.

These financial schemes allow the elderly to cash in some of the value of their home with the debt settled from the sale of their after death.

However a provider dresses up their equity release plan, the engine under the bonnet is pretty much the same – you borrow part of your home’s value and in return you give the lender a share of the sale proceeds when you die.

To qualify, you will generally be at least 60 years old, have no mortgage and own a well-maintained property.
If you are considering borrowing from an equity release plan, Age Concern and the Financial Services Authority recommend taking independent financial advice before proceeding.

Some points you should think about before making a decision are:

• You make no loan repayments – the lender makes their cash back when your home is sold
• The percentage of the property you own is set at the start of the plan
• If the property goes up or down in value, so does your share pro rata
• More cash may be available unless you took the maximum offer from the start
• If you smoke or are ill, you may get more cash than someone who doesn’t smoke and is fitter because the lender may consider they will receive a return on their investment quicker because you may die earlier.
• The property valuation your loan offer is based on will be less than the current market value of your home

To make sure you are dealing with a reputable equity release plan company, check their products carry the SHIP logo (Safe Home Income Plans).

SHIP is a financial industry group promoting safe equity release schemes. You can contact SHIP on 0870 241 60 60 or visit their web site at http://www.ship-ltd.org/

Members provide a number of customer guarantees in their plans, including:

• You have the right to live in your property for life
• You may move home without penalty
• You will never owe more than the value of your home

Summary

• Anyone over 60 struggling on a small pension or limited savings can consider taking out a mortgage or an equity release plan

• Mortgages are difficult to obtain for the over 60s who may not have sufficient income to support the borrowing

• Equity release plans are designed to release cash from the value of a home for the over 60s

• If you are considering a equity release plan, make sure the scheme is SHIP approved

What Is Cancer Cover?

Cancer cover insurance is a policy that will pay a cash lump sum if you are diagnosed as having a malignant tumour. The cash can be used to pay for medical bills and general care while you are ill. Cover can often be obtained for very low premiums from independent companies.

Because the medical cost associated with this disease can be quite high, the policy will pay out a tax free cash lump sum to the claimant. The funds can then be used in whichever way you deem best.

The policy will not pay you a monthly income so when the one off lump sum is paid it is up to you to use in the most beneficial way. Some policies will stagger the payments and pay according to the stages of cancer. These are the type of things you’ll need to question your provider about.

You should note that the policy is not designed to be a replacement for a monthly salaried income and the cash payment is just a one off. With most providers, only one claim can be made per policy.

Do You Need Cover?

The answer to this depends on your circumstances. If you are concerned about the risk of getting cancer then you might want to consider protection against a diagnosis. If you don’t have savings to rely on, then a cash lump sum may be needed especially if you are forced to give up work.

It may not be possible to meet the medical expenses with statutory pay or state benefits so this is another reason to consider the policy.

Having a cancer cover policy will significantly ease the financial pressure if you are diagnosed with the disease. It will ensure you have financial help when you need it most.

Considerations

In recent years there have been stories in the press about cancer patients being unable to claim on their policies because certain conditions were not covered. As a result of the media coverage, companies are now expected to fully explain the terms and conditions of policies and customers are encouraged to ask more detailed questions. The key is to know exactly what you are paying for and what will be covered before you purchase your policy.

Despite the shortcomings of some providers, the cancer cover policies are still very useful to people diagnosed with the disease. The cash lump sum maybe the only thing that can get you the treatment you need and keep you from suffering financially.

Finally, while most types of cancers are covered under cancer cover insurance, it is worth asking our provider for list of exclusions if any, just so you know what will be covered.

Honesty is the best policy with insurance

Honesty is the best policy when dealing with your insurance company otherwise you could lose out when you make a claim.

Somewhere in the policy small print is a warning that says you must disclose any information that might affect the terms of the policy.

If you don’t, at worst, you may find the police knocking on the door to discuss a fraudulent claim while at best, the insurance company will refuse to pay out.

Most people have several types of insurance – for their homes, possessions, cars and pets, for example.

To make sure you are covered, read the policy small print and if in doubt, call your insurance company and discuss your circumstances.

Home insurance

Homeowners have buildings insurance that covers events like storm damage, flooding and subsidence.

Many homeowners and tenants also have contents cover that protects loss or damage to personal possessions like the TV, carpets and furniture.

Every year, many have to pay out of their own pockets for a break-in or damaged property despite having paid for home insurance.

The insurance companies cleverly write policies in their favour policyholders can invalidate their cover unwittingly.

Bringing in builders without notifying an insurer can invalidate building and contents insurance and any claim refused.

• Some policyholders failed to tell their insurers about work on their homes and have had claims refused for water damage while builders were replacing roof tiles and rain poured in during a storm.

• On the other hand, DIYers have damaged their homes by knocking out retaining walls or dropping hammers in the bath and had claims refused because their policies stipulate that competent, professional builders must complete certain work, like structural alterations.

• Some building work, like changing doors and windows may lead to an extra premium if your insurer feels the risk of a break-in is increased by the work.

Many insured homeowners have burglary claims turned down because they have invalidated their policies:

• Failing to make sure door and window locks fitted to the house meet the minimum policy requirements

• New doors or windows are fitted and the insurer is not update

• Police are not told about a burglary so no crime number is assigned to the case

• Items are left out in the garden without little or no security, like garden furniture, tools and bicycles in the open or unlocked sheds.

• A home is left unoccupied for more than 30 consecutive days

• Doors or windows are left unlocked allowing a break-in

Another common problem with home insurance is inflating the claim of repairs or stolen goods. As soon as you put in a claim form that is misleading, you are attempting a fraud, which is a serious crime.

Drivers

Motor insurance is a minefield – some drivers mislead or ‘forget’ to mention driving offences or accidents to try and keep their premiums down and others unwittingly void their insurance by just failing to tell their insurer about changes in their lives:-

• Drivers who don’t tell their insurers about driving convictions or accidents may find their car insurance is invalid.

• Moving home instantly invalidates any insurance policy. When you move, tell your insurance company straight away and ask for a new quote.

• Changing your job can sometimes invalidate your policy as well – for instance you new job might incur some business use of your car which is not covered by your existing policy.

• Letting someone not named on your policy drive your car because your insurance does not cover them.

• Letting your MoT expire and failing to maintain your vehicle to legal standards, for example, driving with worn out tyres will also invalidate your car insurance.

Pets

Overfeeding or neglecting your cat or dog could invalidate your pet insurance if you claim for a condition related to the way you care for your pet

Summary

• Always read your insurance policy small print – and if in doubt, talk to your insurance company

• Don’t mislead or omit information to try and get a cheaper premium or inflate a claim.

Managing your money with a prepaid card

If you’re on a budget and worried about overspending on your plastic, take a look at prepaid cards.

A prepaid card is a backwards credit card – instead of borrowing the money and then paying off your debt plus interest, you pay money in to your card account and can only spend the amount you have put in.

You can spend your cash online, in shops or thousands of other places just like a credit card without the worry of going over your limit.

Many people worry that once they have put money on the card, they can’t spend because outlets don’t accept them, but this is far from true as any outlet on the Maestro network will take the card.

Outlets all over the world also accept prepaid cards.

• Who should have a prepaid card?

If you already have a credit or debit card and have a good credit history, then stick with them.

Prepaid cards are really for people who have problems budgeting their income:

• Repairing your credit history

If you have a poor credit history and are coming out of a bad financial patch or need help managing your money, then consider a prepaid card. You can apply for a card knowing the providers won’t check your credit record.

Prepaid cards do not represent any risk to a lender because you can only spend your own money without running up any debts, so past credit problems don’t matter.

• Teaching your children money management

Lots of prepaid card providers allow anyone over 13 to have a card. You can load up the card with pocket money or the money your child has earned. They can spend in the shops or online.

The card helps budgeting and let’s you keep a track of what they are buying.

• Spending online

A prepaid card opens up a new world of saving money online. Instead of paying cash in the high street, you can pick up savings on thousands of sites like auction giant eBay.

• Holiday cash

Prepaid cards in foreign currencies are generally only available in US dollars or Euros.

Putting your holiday cash on a prepaid card is better than carrying a big wad of cash – if you lose the cash that’s it, but if you lose your prepaid card, providers will give you another with all your money still loaded.

Topping up a prepaid card

Managing a prepaid card is no harder than having a top-up card for your mobile phone.

Simply apply for the card, transfer some cash on to it and spend like any other credit or debit card.

Topping up or transferring money to the card is easy:

• Most prepaid cards have websites where you can add funds.
• Some cards let you transfer money from a bank account. This is often free.
• The most common way of topping up a card is at the Post Office or corner shop. About 20,000 outlets have top-up machines

Adding up the card costs

Depending on the card, you will pay all or some of the charges listed here:

• Top Up Fees

The provider charges a fee every time the card is topped up – generally it’s a minimum of £1 or 3% of the amount you put on the card, whichever is the most amount.

• Usage Fees

Some cards charge a fee for each transaction – if you want to sign up for a prepaid card, check the fees on a comparison site online.

• Application & Replacement Fees.

Most cards charge about £10 to open an account - a few charge a monthly fee as well – and many charge an annual renewal fee of about a fiver.

• Inactivity charges.

Card providers make their money from you using the card, so if you open account and leave the card in a drawer, they may charge you a fee.

• Exchange rate.

Check out the exchange rates before spending abroad – often they are more expensive than normal credit card exchange rates.

Protecting your cash

Besides checking out the small print and the costs, also bear these points in mind if you are considering applying for a prepaid card:

• If you load up a card with a lot of cash and the provider crashes, you lose your money as no protection scheme is in place

• You don’t have the same consumer protection if you buy goods with your prepaid card as you would with your credit card

• The card generally has a maximum cash amount you can load up to about £5,000. Some also have a limit on how much you can spend on the card in a year.

Summary

• Prepaid card accounts are accessible to just about everyone regardless of their credit rating

• The card is a good budgeting tool for those who have problems managing their money or need to repair their credit rating

• Prepaid cards are good for children too young to hold a credit or debit card

• If you can get a normal credit or debit card from your bank, these are often a better option unless you are always overspending

Five Easy Ways to Save Money on Your Car Insurance

Car insurance is a major expense for many drivers, and reports show that we can expect costs to get worse before they get better. A survey by Sainsbury’s Bank indicates that the average cost of car insurance for UK drivers is now £514.38 – a rise of 5.8% on 2007, and the first time the average has broken the £500 since the measure was first recorded in 2005.

However, there are things to do to help keep your car premiums low. Here’s five tips to help you on your way:

1. Be a woman.

Admittedly, this one’s probably out of your hands – but if you do happen to be of the feminine persuasion, you can expect to pay much less for your car insurance. The Sainsbury’s survey also indicated that men pay £540.49 on average, compared with £470.47 for women. Similar circumstances that will probably drive down your premiums include being older than 25, but below retirement age. If you fall into any of these categories, look for specialist insurance providers that might be able to give you a better deal.

2. Buy online.

Several of the larger insurance providers offer considerable discounts for ordering your insurance online – often as much as 10% (or, speaking from the averages, a cool £50). Given that a great many people choose to look online for their insurance package anyway, you could save money by doing almost nothing.

3. Cut out the middleman.

There’s a glut of price comparison services on the internet these days and, while it’s technically possible to get a bargain by comparing a multitude of different providers at once, it’s important to remember that these middlemen have to make their money from somewhere – and that somewhere is you. By going direct, you can usually save yourself a packet. It’s a little more work, but it’s often worth it.

4. Look for bonuses.

While some policies may cost more, you might find that the additional features you get may make it worthwhile. Take no claims bonuses, for example – if your policy allows you to carry over a no claims bonus from a previous insurer, you may save considerably more money in the next year of your policy (should you decide to stick with the provider and, obviously, don’t make a claim). However, these often work off a ‘what if?’ sense of logic, requiring you to gamble a fixed discount today in order to save more in the future.

5. Switch providers.

There’s nothing to say you have to stick with your current provider if you can find a better deal elsewhere. In fact, given that most introductory offers designed to reel in new customers expire after a year, you could well be better off making a move to a new provider; not only do you avoid a price jump as your own introductory offers run out, but you can likely profit from new offers by switching services. Of course, you might lose accumulated bonuses (including no claims discounts, for example), but it’s entirely possible that you’ll still come out on top.

What is a Bridging Loan?

Picture the scene. You’ve found your dream home, you’ve put in an offer, and the current owners have accepted. However, your house is yet to be sold, and your plans for your new home might fall through at any moment if the sellers receive a better offer. You have to move as quickly as possible to make sure you stay in the game. What can you do?

A common response is to use what’s known as a bridging loan. While it might help you keep hold the property you want, it’s important to note that they’re usually expensive, and can leave you in a bit of a financial mess should the whole thing fall through; even if they work, you’re left paying off a loan (usually at a high interest rate) in addition to a mortgage on your new house until your old house sells. As a result, they should be considered a last resort, and not just a way of quickly getting out of general property-chain problems.

Generally speaking, there are two different sorts of bridging loan: ‘closed’ loans, and ‘open’ loans. To be eligible for a closed bridge loan, you must have already agreed to an exchange on the sale of your current house. It’s very rare for sales to collapse after an exchange, so financial institutions feel pretty comfortable about offering closed loans in this situation. However, open bridges are necessary for those customers who are looking to buy a specific property, but might not yet have put their current home up for sale. To get an open loan, you’ll need to have a lot of equity built up, and be willing to answer a whole host of questions from your bank.

One major advantage of a bridging loan is that they don’t generally include penalties for early repayment, while some mortgages do. As such, you can pay off the remainder of your loan the second the sale of your house goes through, without incurring any additional fees. However, as they’re only designed to be a very short term solution to the problem (with most banks limiting the loan length to 12 months before calling it in for renegotiation of terms), the interest rates attached to these loans are often quite high – usually between 2 and 2.5% above the Bank of England’s base rate. You can expect an arrangement fee to be applied as well (often about 0.75% of the loan). This can be off-putting for some buyers, but doesn’t necessarily have to cost you a great deal extra, especially if you can get the sale on its way as soon as possible.

Bridging loans aren’t for everyone – some people may find that remortgaging their property and renting it out until the deal can go through is a better option, especially if they suspect that it may be some time before they’re able to sell their current property – but it can be a useful tool in the short-term, especially if you find yourself at the mercy of a small hiccup in the house-selling process that will be relatively easy to resolve, or at times when the housing market has fallen a little slack.

Giving yourself credit where credit’s due

Banks, building societies and other lenders swap information about your financial details to make sure you are someone who pays their bills on time so they are not risking losing their cash if they lend to you.

All this information is collected in three main databases in the UK and lenders typically ask for one or more of your credit reports from these suppliers when you apply for credit or a loan.

Before deciding whether to lend to you, the lender will consider your credit report, application form and other information that might consider relevant, like you income, and give you a credit score.

Your credit score varies from lender to lender as they all have their own methods of calculating how much of a risk you are as a borrower.

If you are looking at borrowing a substantial amount, like for a mortgage, then it makes sense to review your credit report to make sure no inaccuracies have crept in that may lower your score and perhaps cause the lender to refuse your application.

Obtaining your credit report

The three main companies that collect your financial data are:

Callcredit

• http://www.callcreditcheck.com/

Equifax

• http://www.equifax.co.uk/Products/credit/credit-report.html

Experian

• http://www.experian.co.uk/

You can apply to each company for your credit report. Costs vary depending whether you want an online version or a printed copy sent to your home, but are usually around £2 or a bit more. Check out the pricing at each site before application.

Cleaning up your credit profile

Different lenders add or subtract points from your final credit score. Some of the main point winners and losers are:

• The Electoral Roll
  If your name is not listed at your home address, contact your local council and ask them to add you. Lenders confirm your address and the time you have lived there from the electoral roll.

  The council will send your details to all three credit agencies within 28 days so they can update your record.

• Check for mistakes
  If you’ve paid a bill but your credit report shows you still owe the money, contact the lender and ask them to put their records straight. The lender should pass any corrections on to the credit agencies for you.

• Court judgments and decrees
  If you have paid a county court judgment (England and Wales) or a decree (Scotland) against you for failing to settle a debt, make sure your credit report confirms you have paid in full.

To correct an error, contact the court that made the judgment with your case reference and ask for the court record to reflect your settlement. If the court agrees, the amended record is forwarded to credit agencies with 14 days.

Follow the same procedure if you believe a CCJ or decree is wrongly registered against you.

• Bankruptcy or sequestrations
  If a bankruptcy order or sequestration is annulled or discharged and is not shown on your credit report, send a copy of certificate to each credit agency for updating your record.

• Duplicate credit searches
  If a lender has searched your details more than once for the same one credit application, ask them to delete the additional searches.

  When you apply for credit, your credit record is searched and recorded. If a lot of searches in a short time, this can reduce your chances of borrowing.

Searches stay on your record for 12 months from the date of the search.

• Inaccurate linked addresses

If you have been linked to addresses or other people incorrectly, you can ask the company who made the link to delete the information.

Your address details are collected whenever you open an account – for instance with a mail order company or catalogue.

If other people who live in your home are recorded on your report, you can ask for these to be removed as long as you do not share any joint accounts or tenancy of the property with that person.

• Notice of correction

If you feel you want to explain an entry on your credit report in more detail, you can write to the credit agencies and ask them to put a notice of correction against an entry.

Summary

• Three main credit agencies collate data from all the UK’s banks, building societies and credit companies so anyone you ask for credit can see an overall picture of your financial circumstances.
• You can apply for a copy of your credit report from each of these agencies
• If you think the report contains errors, you can ask the credit company or court to amend their records.
• You can also post a notice of correction on your credit report if you feel an entry on the credit report does not correctly reflect your circumstances.

Interesting information about credit card offers

Credit card companies want your business and they will flirt with you by offering special offers for opening an account.

Teasing you with 0% offers and cash backs certainly seems attractive, but are the card companies really flattering to deceive?

Here’s a guide to the main offers many credit card companies are advertising in a bid to tempt new customers:

Paying no interest

This is the bigger tempter. Credit card companies will offer you an interest free period on a balance transfer and/or any purchases you make for a limited period.

The period may vary from company to company:

• Lasting last from three months to a year or even more.
• Lasting to a fixed date
• Lasting until you have paid off the balance you have transferred

Paying 0% interest on a balance transfer is fine as you can reduce the card debt rather than just tread water paying the interest with a minimum monthly payment.

Balancing act

Do your sums before transferring a balance because the handling fee for switching your credit card debt from company to another could wipe out a proportion of your 0% interest saving.

The fee might be a fixed amount or a percentage of the amount you transfer.

Spending on your new card

Watch out that your special 0% rate applies to transfers and spending. Some cards charge a higher rate for spending if you have a 0% deal on your balance transfer.

Affinity cards

Affinity cards are credit cards linked to a charity or organisation, like a football team. They generally offer card holders extra ‘rewards’

Affinity credit cards come in two types:

• Reward cards that earn you free points that you can swap for extra benefits, like flights.
• Partner cards - often these are charities and football clubs, who pick up commission when you spend on your card.

Cashing in on your spending

Cash back cards offer you an extra incentive to spend by effectively offering you a discount on everything you buy with the card.

Most cash back cards offer a 0.5% reward – that’s 50p on every £100 you spend. Now and then, a special offer comes along that offers cash back up to 5%.

Cash back catches

Cash back cards often have attractive balance transfer offers – but stop and think before trading in your old card for something shiny and new.

Your monthly repayments on a cash back card are automatically deducted off your cheap balance transfer rate until the amount is repaid in full, leaving the more expensive interest to pile upon your purchases.

Learning some card tricks

If you want to transfer a credit card balance and collect cash back on your spending, then consider two new credit card accounts – one for the balance transfer and one for spending. That way you get the best of both worlds.

Summary

• Interest free balance transfers are a good way of reducing your debt
• Read the small print to make sure the card company is loading charges on your spending if you transfer a balance
• Affinity cards help out good causes or a special interest without any cost to you
• Think carefully before transferring a credit card balance to a cash back card

Why life assurance is important to your family and loved ones

Money’s tight and everyone’s looking out their bank statements for ways to make savings on all those direct debits that flow out every month.

One of the payments most of us circle as a ‘maybe’ to cancel is life assurance.

Often, it’s a hefty few quid every month going out and life cover is spending that the person footing the bill never receives the benefit from.

Before you cancel that direct debit, have some careful thoughts about the pros and cons of life assurance for you and your loved ones.

Life assurance is designed to pay out a lump sum on the policyholder’s death.

• Term assurance covers someone’s life for a fixed period, like 10 or 20 years. Within term assurance are several different pay out and payment plan choices.

• Whole life assurance provides cover from the start of the policy until you die, when a lump sum is paid out.

Policies can cover couples, often on a ‘joint life first death’ basis, which means the policy pays out a lump sum when the first person dies.

If you’re young, single, rent and have no dependents, then life assurance is worth the investment if you have cash to spare – because if you shop around you can buy cover cheaper now than when you settle down later simply because you are younger and hopefully fitter.

If you own a house, you should consider some cover so you can pay off the mortgage and pass the property on to your loved ones.

The same goes if you are living off savings, investments or a pension and your partner has an income too, then life assurance is probably not worth the cost for either of you.

For everyone else, some serious thinking is required before you cancel any life assurance.

• You can probably never buy the same cover as cheap again because the older you are, the more expensive the cover. This makes cancelling a policy and starting again a few years later a false economy.

• If you are the main bread winner, you need to consider giving your partner and any children a breathing space to get on a sound financial footing while keeping a roof over their heads

• If you are a one-parent family, a payout gives a helping hand to whoever takes on caring for your children while they sort out their new life

• If you care for someone with special needs, you have to think of the costs involved in housing and caring for them should something happen to you.

The probability is most people are under-insured as the mortgage is a reasonably low percentage of most people’s outgoings while interest rates are low.

So rather thinking of cancelling your policy, perhaps you should check if you have enough cover to make sure your family can cover the rest of their monthly spending on essentials like food, petrol, utilities and Council Tax should you die unexpectedly.

Looking at life cover called family income benefit can help here. A family income product pays out a tax-free fixed monthly amount rather than a lump sum like standard life policies. Some family income benefits are indexed linked as well.

You need to look on the web for one of these policies, as most high street banks, building societies and supermarkets don’t sell them.

Type ‘family income benefit’ in to your search engine and lots of comparison sites will come back so you can shop around for a quote.

Summary

• Life assurance is designed to pay out a lump sum when the policyholder dies.

• If you are single or retired, you probably don’t need any new life policies

• Families, homeowners and carers should look at if they died whether life assurance would help others reliant on their income

• Check the amount paid out by the life company is enough for your loved ones’ needs if you pass on

• If you are thinking about starting or increasing life cover, check out whether a family income benefit policy is more cost-effective and better suits your circumstances.

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