Insurance 

Protect the things that matter 

Accident Sickness & Unemployment (ASU)

Accident, sickness and unemployment (ASU) insurance is usually a short-term income protection policy that pays you a tax-free income equivalent to a proportion of your salary for typically up to 12 months should you be unable to work due to accident, sickness or involuntary redundancy.  

 

The policy is designed to provide an income when you need to take extended time off work because of illness or injury to avoid having to otherwise rely on savings, or sick pay until you are able to get back on your feet. 

There is usually a deferred period before payment. This is the time between going off sick or losing your job and being paid your insurance benefits. So, for example, your income protection payments could commence once you have been off work for, say, six weeks.  

The longer your deferred period, the cheaper your monthly premiums are likely to be. 

ASU is not tied to a particular debt or mortgage and should not be confused with payment protection insurance (PPI) which typically pays a particular debt, like a credit card in the event of accident, sickness or unemployment.  

ASU should also not be confused with mortgage payment protection (MPP) which like PPI pays a particular debt in the event of you becoming sick or unemployed etc., in this case the debt specifically being your mortgage.  

Accident sickness and unemployment policies do not cover you for  

a) resigning from your employment; or 

b) being dismissed from your employment; or 

c) pre diagnosed illnesses. 

Private Medical Insurance (PMI)

Private medical insurance (PMI) - sometimes referred to as health insurance - is an insurance policy that covers the costs of private healthcare, from diagnosis to treatment for certain conditions thereby avoiding the need to use the National Health Service. 

 

PMI will generally cover you for ‘acute conditions’, such as a hip replacement or having a hernia removed. You can buy different types of policies that offer various levels of cover, at varying costs. This could include fast-track diagnostics for cancer or access to different cancer treatments not currently available on the NHS. 

The monthly subscription covers all or some of the cost of treatment for acute conditions covered by the policy that develop after your health insurance policy has begun.

  

Basic policies typically cover: 

a) any in-patient treatment that you might need, such as surgery; and 

b) the cost of your hospital stays. 

More extensive policies might also include out-patient treatment, which covers the expense of seeing specialists and consultants, as well as the cost of undergoing diagnostic or follow-up tests.  

In some policies you may also have the option of tailoring policies with add ons such as:

 

a) dental care 

b) eye care 

c) physiotherapy 

d) homoeopathy 

e) mental health support 

f) pregnancy or maternity services 

If you want health insurance that covers someone other than yourself, you may also be able to cover loved one such as your children and/ or partner or spouse.  

It is therefore essential that the specific wording of each policy is considered very carefully to ensure that it meets your specific needs. 

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Buildings Insurance 

Buildings insurance is an insurance policy which can cover the cost of repairing damage or even fully rebuilding the structure of your home if it damaged by an event that you are insured for, such as a fire, flood or storm. 

Policies typically include cover for your roof, floors, walls and fences, as well as any permanent fixtures and fittings, like your kitchen and bathroom.  

Buildings insurance can also cover outside structures connected to your home, such as garages and pipes. 

 

Your insurance should cover the full cost of rebuilding your house. This also includes the costs of demolition, site clearance, and architects' fees. It is important to make sure you insure yourself for the amount it would cost to completely rebuild your home. This is called the sum insured. The cost of rebuilding your home is not the same as the price you paid for your home, or its current value if you were to sell it. Rebuild costs are usually less than the current market value as a lot of the cost of purchasing a property is the cost of purchasing the land as well as the building on that land.  

 

Buildings insurance usually covers loss or damage caused by: 

a) fire, explosion, storms, floods, earthquakes;  

b) theft, attempted theft and vandalism;  

c) frozen and burst pipes;  

d)fallen trees, lampposts, aerials or satellite dishes; and 

e) subsidence. 

 

There is no legal obligation per se to obtain buildings insurance but considering the vast amount of money we spend on purchasing our homes it would make sense to have buildings insurance to protect that expensive and vital asset - your home. This even more so the case if you live somewhere at a high risk of flooding, crime or subsidence.  

In many cases, your mortgage lender might also require you to buy buildings insurance to protect their interest in your asset during the term of the mortgage. 

If you purchase a flat as part of a block then it is your landlord, (the freeholder or the lessor), who will purchase the buildings insurance for the whole block and the cost of this policy is usually included in your service charge.   

When purchasing a flat in a block, you should always make sure that your interest is noted on the block policy to ensure that you are covered. 

Buildings policies usually give you legal liability protection as the occupier and owner of your home. This means that as part of the policy, the insurer will also cover you and your legal costs if the structure injures a passer-by or visitor or damages a neighbour's property.

 

It is very important that you do not over or under insure yourself and expert advice should be taken to ensuring that the correct insurance and level of insurance is purchased.

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Contents Insurance 

Contents insurance is an insurance policy that covers the cost of replacing your damaged personal possessions in the event of theft, loss or damage, including natural disasters, fires or flooding. Different policies cover different risks so it is very important that you look at the actual wording of the each specific policy. 

Contents insurance is separate and distinct to buildings insurance which covers the building you live in itself and the fixtures and fittings. 

The difference between fixtures and fittings and personal possessions as a general rule is that fixtures and fittings are items that cannot be picked up and moved – they should be insured with your buildings insurance and personal possessions, which can be picked up and moved, should be insured with your contents insurance.  

Often insurers ask you to estimate the total value of all your possessions, but insurers require you to notify them of any particularly high-value items, especially jewellery, computers, or expensive bicycles for example. 

If you need both building and contents insurance, buying combined insurance can be cheaper and limit any disputes among insurers, for example, if you need to make a claim affecting both the structure of your home and its contents, such as a flood. 

Should you decide to buy two separate policies and you need to claim, there may be arguments between your two providers over who should cover what. It is rare, but it is possible. 

Contents policies usually also give you legal liability protection as the occupier and owner of your home. This means that as part of the contents policy, the insurer will cover you and your legal costs if a visitor to your home is seriously injured and it is deemed to be your fault. 

Not everything is covered, the specific wording of your policy should be checked carefully. For example, contents insurance will not usually cover you against acts of terrorism or general wear and tear.

  

Please also be aware that many policies may also be invalidated if your home is unoccupied for more than 30 consecutive days during the year.  Further, if you are away for a long time and a pipe bursts for example, you again may not be insured in those circumstances. 

There is also usually only limited cover for accidental damage. 

 

It is not uncommon to see policies that do not cover you for theft if you sub-let your home and there is no sign of forced entry.  

If you run a business from home, or work from home, you should check your policy carefully to ensure that you qualify for liability protection and understand that business related contents may not be covered under a personal contents policy. 

It is also vital that you do not over or under insure yourself and expert advice should be taken to ensuring that the correct insurance and level of insurance is purchased. 

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Inter Vivos Insurance 

Gifts to individuals during your lifetime that are not immediately tax-free will be considered as ‘potentially exempt transfers’ or PET’s. This means that they will only be tax-free if you survive for at least seven years after making the gift. If you die within seven years, the gift will be subject to Inheritance Tax. This is known as the seven-year rule. 

If you die within seven years of making a potentially exempt transfer, the transfer becomes chargeable. Its value will either reduce or eliminate your Nil Rate Band which means that less of your assets will be passed on to your beneficiaries tax-free. 

The rate of inheritance tax that the recipient will pay gradually reduces over the seven-year period – this is called taper relief. 

 

This is how tapering relief works: 

If you die within 7 years of making gifts in excess of your nil-rate band, the onus is on the recipient of the gifts, not your estate, to pay the inheritance tax bill due on the gift. So if you do not want to leave your loved ones with a nasty surprise after you pass away then you may wish to take out a gift inter vivos insurance policy.  

A gift inter vivos insurance policy is one that provides a lump sum to cover the potential IHT liability that could arise if the donor of a gift dies within seven years of making the gift. The lump sum provided is in line with the potential IHT liability and reduces in line with taper relief available (as shown above). 

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Penn Financial is the trading name of Penn Financial Limited registered in England and Wales number 06242330 and the registered office is at 13 Austin Friars London EC2N 2HE where a list of directors is available for inspection.

 

Penn Financial Limited is authorised and regulated by the Financial Conduct Authority number 927714.  Please be aware that Commercial Mortgages, Overseas Mortgages and some Buy To Let Mortgages are not regulated by the Financial Conduct Authority. The guidance on this website relates to the UK regulatory regime and is targeted at UK based consumers.

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