More than two-thirds of the UK’s working population are worried about a loss of earnings due to injury or illness such as COVID-19. However, despite these financial concerns, only 19% working adults protect their income through insurance, falling to just 9% for self-employed workers. Source: Mortgage Introducer. If you were unable to work due to illness, injury or redundancy, how would you keep paying your monthly bills? If you were to die prematurely, how would your loved ones and dependents cope financially? Sam and Ross catch up with Nottingham Mortgage Services adviser Jonathan Saint to discuss what types of cover is available.
Sam: You're listening to The Money Pot, a channel that provides information on the world of finances, from savings accounts to mortgages and money saving ideas. We'll also have discussions about planning a better future and fraud awareness. Plus top tips from bloggers who talk about their home buying and financial experiences, interior inspiration and much more. My name’s Sam.
Ross: And I’m Ross and together we'll be chatting to industry experts who'll give you information to become a financial master.
Sam: Welcome back to another episode of The Money Pot. I'm here as ever with Ross. Hi Ross.
Ross: Hi Sam. This is the first episode that we're recording since it was your 30th birthday, so happy birthday old chap.
Sam: Thank you very much. Happy birthday to me. It's very strange to be in my thirties now, but we we're both in that category. We're both in that section.
Ross: I had little look online about what people are saying about turning 30, which I guess is the next milestone since turning 18 and 21. But before we look at those I want to know what you felt about turning 30. Did it bother you? Did it even cross your mind?
Sam: Oh, it absolutely crossed my mind Ross and this was my second lockdown birthday. I've unfortunately timed things a bit weirdly. The first lockdown started just before my 29th birthday. And then there was a lockdown again, by the time it was my 30th birthday. In fact, the fact that we were locked down at the time, took some of the pressure off me wondering what I was going to do for my 30th birthday. Like the pressure to do something interesting, have some big party. That was gone, which I was quite relieved about to be honest and I could have more of a quiet one. As with a lot of things. I was worried about it in the run-up and then once it happened, once I turned 30, I'm absolutely fine about it. And it hasn't bothered me since, but I was really, you know, the last few days of my twenties. You know, it doesn't really, it’s just a number.
Ross: When my wife turned 30, it did play on her mind a bit. And I think for her moving into a new decade where she thinks that you're officially old or an adult, are there new types of pressures. Whereas I, when I turned 30, I just see it as a number. And I just carried on with my day.
Sam: I think that's the best way to look at it. I definitely fell into that trap of thinking, well, by this point, I should have achieved these milestones or done these things or whatever. But everyone lives their life at a different pace in different ways. You take different paths. And if you start thinking about it like that, you can relax a bit about the fact that you're in your thirties now. And I'm sure there'll be people listening, thinking what you talking about. You're still, both of you are still very young stop moaning about being thirty. But yeah, it did play on my mind a little bit, but I'm absolutely fine now.
Ross: Good, and you say relaxing there brings me on to some of the stats that I was looking at and these have been published online, so don't hold me to these because they probably aren't true.
Sam: Is it a reliable source that you find?
Ross: I doubt it, I doubt it. However, people in their thirties are apparently the happiest and that's down to living in the moment and putting yourself first. So I guess if one of your friends asked you to, I don't know, help move house, I wouldn't be surprised if you opt for day in bed and watch Netflix.
Sam: No, no, I think I'd still help. I don’t think that you turn thirty and you become less helpful, but yeah okay. Interesting.
Ross: The ability to recognise faces peaks in your thirties. So, when we go back into the office, you don't have to fear about remembering people.
Sam: Okay, because I have been worried about that.
Ross: The next one. You can use your age as an excuse to go home early. So if you're out and you're not really feeling it, there's an excuse Sam.
Sam: I’ll be honest Ross. I was still doing that in my mid-to-late twenties. I love an early night. I've loved it for quite a long time now.
Ross: Yeah, back door it, speak to you tomorrow. So, you can now apparently go on day trips. It's finally acceptable to get a National Trust membership or something, which makes me feel a bit old because I've been doing that for years.
Sam: Yeah. Nothing wrong with that.
Ross: And what you like with chess? Are you any good at chess or you're looking to learn how to play chess?
Sam: Um, I don't think I've ever played a full game of chess. I think I might've messed around trying to figure out at some point, but I don't, I've never played chess. Is this going to be the decade to get into chess?
Ross: Yeah of course. The chess grandmasters become most successful when they're in their thirties.
Sam: Right, that can be my lockdown thing Ross, we can play virtual chess against each other and try and figure out what we're doing. Do you know much about chess? Do you play chess?
Ross: No but I did watch The Queen’s Gambit.
Sam: Oh, so now you're an expert.
Ross: Oh yeah, absolutely. Since I watched that, I was like, well, I'm going to get a chess board and learn how to play.
Sam: Well, I'll get into chess. Be more relaxed, not help anyone move house. And, go on some day trips and that's great. I'm excited for my thirties.
Ross: When I said earlier about me turning 30. It wasn't too much of a big deal. There was something I wanted to do before I turned 30. And that was to kind of sort my finances out. And one of those things was to organise life insurance because at the time I didn't have any, and I'm not saying this should be done when you're 30, because that all depends on everyone's individual circumstances. But for me, I knew it was the time and it was one of those things I kept putting off and I don't know why, but I did. So when the time came, I looked online and there was just so much to take in there's different types of cover from life insurance to income protection and serious illness cover. And there's a few others as well.
So, when I was thinking about Money Pot episodes, I thought, surely there's people out there like me who doesn't have a policy in place and also doesn't know too much about it.
Sam: Yeah, I'm in the same boat in the exact same situation. And that's why in today's episode, we'll be speaking to a Nottingham Mortgage Services adviser who can arrange life insurance and income protection to give us a bit more information about what's available and to hopefully give you a better understanding of what type of policy is right for you.
Ross: Let's get into it.
Sam: All right.
Sam: Hi Jonathan. Thank you for joining us on today's episode, please. Could you tell our listeners who you are and what's your role is at Nottingham Mortgage Services.
Jonathan: Yeah, so hi everyone. My name's Jonathan Saint and I'm a mortgage and protection adviser at Nottingham Mortgage Services.
Ross: And could you tell us a bit about your career before joining Nottingham Mortgage Services and any qualifications that you've got.
Jonathan: Yeah, of course. So I've been in the financial services arena since I was 18 years old, so I'm not going to give away my age, but it's a few years. I started off in a bank, worked my way up there, but then decided to sort of go down the route of mortgages. And I've been a whole of market mortgage broker now for getting on for eight years.
Ross: Lovely, and do you have any qualifications?
Jonathan: Yeah, absolutely. So I'm fully CeMAP qualified, which is the industry qualification to advise on mortgages.
Sam: Fantastic. We have a stat on our website from Mortgage Introducer which says that more than two third of the UK’s working population are worried about a loss of earnings due to injury or illness, such as COVID-19. However despite these financial concerns, only 19% of working adults protect their income through insurance, falling to just 9% for self-employed workers. If injury or illness stops people from working it could mean that people may not be able to cope financially if they haven't got something in place or significant savings to fall back on. Could you give a quick explanation on the different types of available cover and why you might need them?
Jonathan: Yeah, absolutely. So let's kick off with life insurance. So there's two types of life insurance really that are available. First of all, term insurance. So term insurance. Basically means that you have the life cover for a certain amount of time. So that could be 20, 30, 40 years. And whole of life cover is really, as the name suggests, is there for the whole of someone's life. So there's no end date on the policy.
The next one really is income protection. So income protection is there to replace your income, if you're unable to work due to accident or sickness, and it generally replaces up to 75% of your income. We've also got critical illness cover and serious illness cover. Now these are used interchangeably, but essentially mean the same thing. So if you're diagnosed with a critical illness or serious illness, what it will do is it will generally pay off your mortgage in full, or depending on the severity of the condition that you’re claiming for it will pay out or partial payments.
And last of all, mortgage payment income protection. So this is a form of income protection, but it's specifically designed to meet your mortgage payments each month. And any other debts that you've got any credit card debts or loan debts or anything like that. So they're really the main types of cover available.
Ross: So with life insurance, and we'll talk about the term insurance, under what circumstances would someone need that type of insurance? So, for like for 20 or 30 years.
Jonathan: So generally we've life insurance you tend to take life insurance over a specified period of time to link in with the mortgage term to fully protect the mortgage. So if you've got a mortgage, for example, for 25 or 30 years, You will then have the term insurance, generally to match the mortgage term to ensure that you're fully protected throughout the mortgage term.
Ross: So is the other type of cover, which is whole of life. Is that just to give you a little bit more protection once your mortgage has been paid off?
Jonathan: Absolutely. So whole of life cover is there for the whole of someone's life, essentially. And the key difference between the whole of life and term assurance is that it will pay out once you’ve died. So it's guaranteed to pay out. So that's really the key difference.
Whole of life cover is quite a bit more expensive than term insurance, but purely because it's guaranteed to pay out.
Ross: Okay, great. And life insurance for me was a purchase last year. And when I was looking, I come across the option of a decreasing, level or increasing cover. Could you just explain what they are.
Jonathan: Absolutely. So let's just start off with decreasing term assurance. So that is typically used to protect a repayment mortgage. So the amount of cover would start off at, let's say a hundred thousand just for argument's sake, and then what it would do is it would decrease each year typically in line with your mortgage. So at any given point during the mortgage term, there would be the money there to fully repay the mortgage.
You’ve then got level term cover. Now this means that the sum that you take out at the beginning of the policy would stay the same throughout the term. So if you take out a hundred thousand pounds worth of cover for 20 years, that will stay at a hundred thousand pounds worth of cover for the 20 year period. Typically, if you've got an interest-only mortgage, for example, whereby you're not reducing the capital, it’s a good idea to have level cover. So, it means that you can pay off the mortgage in full if it was ever needed.
And increasing cover, essentially the opposite of decreasing really. It increases broadly in line with the retail price index. So it's there to stop inflation eroding the amount that you’re covered for.
Sam: And Jonathan, can you get a joint policy if you live with a partner?
Jonathan: Yeah absolutely, you can get joint policy, no problem at all. It depends whether you're married or not, but it's usually best practice if you have a joint policy, you live with a partner and you're not married, to put it in trust.
Ross: And what price do premiums for life insurance start at?
Jonathan: I suppose the broad answer for this is, the younger and healthier you are at the start of the protection, the cheaper it’ll usually be. Health obviously affects the cost of the policy and any medical conditions that you may have. So whether you smoke, your height and your weight, you lifestyle, hobbies and job also play a part in how much the premium will be.
Ross: And the second type of cover you mentioned was income protection. Could you just tell us a bit more about that please?
Jonathan: Yeah, so income protection, it typically protects or replaces up to 75% of your income and you're able to claim on income protection if you're unable to work due to accident or sickness, and it's there to replace your income to ensure that you can still pay your mortgage and still pay your household bills and expenditure.
Sam: Who should consider income protection cover and is it something that you need?
Jonathan: I think the broad answer to that really is anyone that has an income should consider income protection, because what people need to consider is… can they still meet their financial commitments if they weren't able to work due to accident or sickness. And if not, then they should look at putting income protection in place. You know, the statutory sick pay that's available now is £96.35 per week. It's just increased. But what you need to ask yourself is could you still maintain your standard of living on £96.35 per week? So, yeah, generally anyone with an income should really consider income protection.
Ross: And is that available to both employed and self-employed workers?
Jonathan: Yeah, absolutely. So employed workers, depending on what you get from your employer for sick pay, you know, that can always be influence the length of the income protection or when it starts to pay out. But if anything, a lot of self-employed people don't actually realise that they can get income protection, but they're the people that probably need it more than them because if you're not working as self-employed, the chances are, you're not earning any money. So yeah, absolutely income protection is definitely something to consider if you're self-employed,
Sam: Do you legally need life insurance or income protection in place when applying for a mortgage?
Jonathan: The simple answer is no you don't, it's not a legal requirement. It’s obviously best practice and obviously something that an adviser will discuss as part of the process, but definitely not legal requirement.
Ross: What about those that are renting, would you suggest that they should consider income protection as well?
Jonathan: Yeah, again, absolutely. I think there's a bit of a misconception out there that it doesn't apply if you’re renting but if you’re renting you've still got the same bills, essentially, as someone that's got a mortgage. So absolutely, I would encourage anyone that is renting to look at income protection. And again, think about whether you could still pay your rent and still pay your bills if you was unable to work due to accident.
Sam: Is income protection the same as life insurance?
Jonathan: No. So income protection is there to essentially provide an income if you are unable to work due to illness or injury. Life insurance is there to be paid out to your family, wife, partner, children if you were to die.
Ross: The next one that you mentioned was critical illness and serious illness cover. What is actually covered under these policies?
Jonathan: So there's a whole host of conditions that are covered under these policies. The top five, actually that insurers payout for on these policies are cancer, heart attack, stroke, multiple sclerosis, benign brain tumor. They're the top five, but there's a whole host of conditions. So it ranges from all of those that I've mentioned to things like losing limbs, losing eyesight, deafness, heart disease. So there's a whole host of conditions that are covered under these policies.
Sam: Jonathan, do you need life insurance before you can then apply for critical or serious illness cover?
Jonathan: No, not at all. You can have any of these policies individually or standalone. So, you know, you could have critical illness cover for instance, without having life insurance and vice versa. You don't need life cover in place to have access to the other types of protection that are available.
Ross: And finally you mentioned there was mortgage payment protection insurance. What's the difference between that and just general life insurance?
Jonathan: Mortgage payment protection insurance is a form of income protection essentially, that covers things like your mortgage payments, any debts that you've currently got, any loans, credit card debt, and it's there if you've been made involuntarily redundant, or you are unable to work due to accident or sickness. The full income protection that's available is designed to pay your mortgage and pay your debts if you're unable to work, but also to cover the costs of your household expenditure, for example. So I guess the key differences one is there to cover your mortgage payments and the other is there to cover your expenditure, essentially.
Sam: I know you mentioned reviewing your cover earlier. Do any of the types of cover we've spoken about today work like home insurance, where you get a new policy annually, or is it generally speaking one policy for life?
Jonathan: It’s not generally one policy for life in as much as that some providers out there will provide guaranteed premiums. So, what that means is when you take out your policy, you will pay that certain amount for the remaining term of the policy, but some providers have reviewable premiums. So what that means is that it will start off X amount per month and providers generally review the premiums either every 12 months, every five years, but not only can it go up but it could also come down as well, but that also goes back to the importance of reviewing your policy as well, because your health might change, your circumstances might change and your income might change, especially if you've got income protection. So it's always worthwhile to review your policies either annually or certainly as a minimum when your mortgage deal comes to an end and the adviser's reviewing your policy at that point. So I guess don't stick in a drawer and leave it there, that's I guess what I'm saying.
Ross: And if someone was to claim on their policy, do their premiums go up and why does that happen?
Jonathan: So someone claims on the critical illness policy, for example, depending on the severity of the condition that they're claiming for, it would either pay out fully or the provider would make partial payment.
So if the policy was paid out fully, that policy would cease. If it was a partial payment, the policy would continue. Again with critical illness, if that was the case, then depending on the condition or illness that you claim for, it might mean that you can't get replacement cover for a period of time or that cover might be more expensive to obtain because of illness that you've claimed for.
Sam: Okay, great. So there’s certainly a lot to digest there. How does Nottingham Mortgage Services help those looking for the type of cover we've spoken about today?
Jonathan: So you'd would have access to a dedicated adviser and they will discuss all of the options available and sort of talk about the options that right for you, which is the most important thing.
Ross: And in that application process what type of questions would an adviser ask?
Jonathan: If we're talking about across the whole range of policies that are available, it could be how much life cover you require, how much income you need on a monthly basis, what’s your employer sick pay or any other income streams that you have available. And as they go through the application process with you, it will be a case of discussing health and lifestyle questions so that an application can be made for the type of cover that's most suitable for you.
Sam: Fantastic. And how could someone find out more or get a quote for any of the types of cover we've talked about today?
Jonathan: So they can visit The Nottingham website which is thenottingham.com/podcast, where you can find links to more information. And there's a contact number on there to call us, to get the ball rolling.
Sam: Jonathan thank you so much for joining us on The Money Pot.
Jonathan: No problems at all. My pleasure.
Sam: Well, that was a lot of useful information there from Jonathan, which hopefully gives a much better understanding on what types of cover are on the market.
Ross: Yeah, definitely. And I can remember when I was looking for cover, having looked online and realising there's so much more to it than any type of cover I've taken out in the past, for example, my car insurance or home insurance. I wanted to speak to an adviser to discuss my circumstances, which is what I did. And if you're in the same boat as me and would like to talk things through, we'll leave contact information on thenottingham.com/podcast so you can speak to an adviser at Nottingham Mortgage Services who can arrange the type of cover that suits you.
Sam: And we’d just like to say thanks again to Jonathan for coming on the episode and clarify all sorts of things, giving us all sorts of useful information. So thanks again, Jonathan. So that's it for another episode of The Money Pot. We'll see you next time. Cheers Ross.
Ross: I'll see you in the next one.
Sam: To find out more about anything we've discussed in this episode, visit the nottingham.com/podcast. And if you enjoyed this episode, be sure to subscribe so you're notified when a new episode is released. You can rate and review this podcast and share it with your friends. And if you have any topics that you'd like us to cover, reach out to us on our Facebook, which is facebook.com/thenottingham or on our Twitter, which is at @NottinghamBS. So until next time, thank you for joining us and we'll see you on the next on