Critical illness insurance:
Critical illness insurance will cover you in the event of a serious illness such as cancer, coronary artery by-pass surgery, heart attack, kidney failure, major organ transplant, multiple sclerosis and stroke. Additional conditions covered by this insurance can include aorta graft surgery, benign brain tumour, blindness, coma, deafness, heart valve replacement or repair, loss of limbs, loss of speech, motor neurone disease, paralysis/paraplegia, Parkinsons disease, terminal illness and third degree burns. Not all insurance companies will necessarily cover all of these illnesses, whilst some insurance companies will cover more; it is always worth reading the terms and conditions before you sign anything.
Critical illness insurance policies typically offer a tax-free lump sum if you are diagnosed with one of the above illnesses and meet the conditions outlined in the policy contract. The lump sum is most often used to cover the remainder of the mortgage, although can be spent on home alterations or medical care etc.
Life insurance:
Life insurance is usually taken out if your family or partner is financially dependent on your income. Life insurance can also be purchased as life assurance and in this form, can offer a method of protection cover and savings. However, most people simply use it as a form of financial protection for their mortgage and therefore their family. There are three main types of life insurance: term insurance, whole life insurance and endowment insurance. More information can be found on these forms of life insurance on the Association of British Insurers website, listed in the resources section of this article.
Mortgage life insurance:
Mortgage life insurance is essentially the same as a decreasing (lump-sum) term life insurance policy and is designed to pay out a lump sum upon the death of the policy holder, should it occur during the term of the mortgage. The size of the lump sum will decrease over the term of the life insurance policy, in the line with the outstanding mortgage repayments. E.g. As you pay off your mortgage, the amount of cover will decrease as the need is less significant.
Mortgage protection:
Mortgage protection, also called mortgage payment protection, is a type of insurance that can help protect mortgage payments and associated household costs in the event of unemployment, illness or an accident. Through mortgage payment protection, you can insure your monthly mortgage payment, monthly life premiums and the monthly cost of your buildings and content insurance. Typical mortgage protection cover could include:
* Unemployment and disability insurance cover
* Accident or sickness
* Unemployment only insurance cover
* Disability only insurance cover
Loan payment protection:
Loan payment protection policies are designed to protect the repayments to any loans you may have taken out. They work on a similar basis to mortgage payment protection, but for a wider scope of borrowing. Premiums for loan payment may be greater than those for mortgage protection.
Income protection:
In the event of unemployment, sickness or an accident, income protection insurance offers a limited income. Do make sure you understand the terms of the policy however, as the income that you received through cover may be significantly less than the income you receive through employment.
Private medical insurance:
Private medical insurance is a policy which will provide financial cover for medical treatment in the event of an acute condition. According to the Association of British Insurers, the majority of insurers define an acute condition as a disease, illness or injury that is likely to respond quickly to treatment which aims to return you to the state of health you were in, immediately before suffering the disease, illness or injury, or which leads to your full recovery.
Private medical insurance provides reassurance for people who know that treatment is available promptly should they become ill or injured.
Resources:
http://www.abi.org.uk/ The Association of British Insurers
http://www.moneynet.co.uk/insurance/index.shtml Consumer Insurance Comparison Research
http://www.moneynet.co.uk/home-car-travel-insurance-guide/index.shtml Insurance Guide
What types of annuities are available?
There are basically two types of annuities fixed and variable.
A fixed annuity earns an assured interest rate in a definite period of time. If the period of times expires, there will be a new interest rate for the next period.
Variable annuities have more funding options than fixed annuities since their performance depends on the option of investment of the principal and return vary.
What is a tax-deferred annuity?
Tax-deferred annuity allows you to not pay taxes until after you make a withdrawal or until you start receiving an annuity. Having a tax-deferred annuity permits you to collect a bigger amount of money over an extended period of time.
What is the difference between a fixed and variable annuity?
Fixed annuities are investments from government securities and corporate bonds. They are offered a fixed or guaranteed rate usually over a period of one to ten years. So, when you receive payments, the monthly release of funds is set to a fixed amount and already guaranteed. This type of investment is preferred by investors who value safety and stability of their money and for those retirees who want their money to be protected against the possible instabilities of the stock market.
Variable annuities allow you to put your investment into a variety of securities like money market securities and interest accounts offering fixed rates. Stock market performance will decide the annuitys value and the return of your money that you have invested. Though there is a great risk because of unprecedented movement of stocks in the market, some still consider investing in a variable annuity because they are comfortable of fluctuations in the market and get rid of their investment in static position.
What are deferred and immediate annuities?
A deferred annuity is a pay-out plan offered to investors who are willing to receive payments at some later date, commonly at the retirement of the investor. This type of pay-out is advantageous for long-term retirement plans for the following reasons:
Deferred income taxes payment until withdrawal of the money
No limits on yearly annuity contributions
Death benefits are readily available. If the investor dies before he collects his annuity, the beneficiaries get the amount you have put in plus investments earnings.
In an immediate annuity, the investor automatically begins to receive lump sum pay-outs immediately upon investing your money. Payments start usually a month after you have invested into the annuity. This offers financial security in a sense that you will receive income payments for the rest of your life. Also, this annuity permits you to:
Add your pay-outs received in your current income
Pay taxes on the portion of the annuity payments that are considered to be earning
Immediate annuities can be fixed or variable. Fixed immediate annuity payments are attached to the amount that you have contributed, your age, and the existing interest rate at the time you have purchased the annuity. These said payments are already fixed. Variable immediate annuities vary according to the type of investments you purchased.
What is a tax-sheltered annuity?
Tax-sheltered annuity is a retirement savings program limited to public educational institution employees and members of non-profit organizations. Contributions to a tax-sheltered annuity are made by the employers of the participating employee. These are deducted from the participants income payments and sent to the insurance agency or mutual fund guardian elected by the participant.
What is a lifetime annuity?
A lifetime annuity is a type of immediate annuity wherein upon investing you automatically receive guaranteed income payments for the rest of your life. The income you will receive from the lifetime annuity plan will depend on the amount of money you will invest and the existing rates at the time you made the investment.
The reasons for mortgages or loans are because of the high spending rate of the people in USA. According to the news agency USA TODAY there seems to be a reduction in the saving rate of the people. The cash flow, which is quite slow, is one of the reasons and increase in the spending habit of the people. Another reason is that people having been borrowing against their assets But the biggest reason for our poor savings rate is that people have been borrowing against assets mainly their homes to get their hands on spending money. The median price of a home rose 24.5% from 2001 through 2004. The real boom period was 2005: The median home price half cost more, half cost less soared to $206,600 from $184,100 in 2004. Due to reasons and to tap the potential there has been an increase in the number of Lenders in the last few years.
The reasons of increase in the spending habit of the people is because of more gadgets and more luxury in order to get into more luxury people are using all their money into gadgets which ensures luxury. Increase in awareness and trying to ape the rich i.e. trying to get costlier clothing and accessories to feel good. The spending of the people is not in accordance with the income that they earn but is also eating into their savings. In a recent study it has been found that many people havent saved for their rainy day. There is very less or no emergency fund among people. The people who have retired have found that they have no fund to spend rest of their lives. The savings rate has drastically come down.
As said above to lay their hands on spending money, for emergencies, for building a house (without enough finance in hand) and for education that the there has been an increase in need to borrow money and hence increase in the lenders. Though reasons like building a house or education loan is quite understandable in nature and is also repayable within the fixed period of time. It is only the increase in the loan for emergencies and spending money that is worrying a lot of economist. This increase can only be tackled when the people learn to live within their income.
Most families are spending more and more money every year (and not just because the cost of living rose) while also saving less and less. One reason is that few household managers spend much time reviewing expenses and expenditures to find ways they can save money. However almost every family has places where costs can be cut and pennies can be pinched — and if those freed up funds are then used to pay down debt and save for the future it could have a dramatic impact on their quality of life.
Food is one big area where many families could be more thrifty. Families spend an average of $2,434 on food away from home, according to the Consumer Expenditure Survey from the U.S. Bureau of Labor Statistics. If you (and your spouse and your children) eat lunch out every day of the week then try brown-bagging at least one of those days. If just one of you does it you may save up to $400 a year and if you can double or triple that savings you could finance a family vacation with it.
Another major expense is your home. When was the last time you looked at refinancing? Can you find a lower interest rate? Can you renegotiate to a shorter time frame? Even if you can’t change your mortgage payment you may be able to pay a bit extra each month which over time will help pay down your mortgage faster. Also, don’t overlook your utilities. There are ways to save in this area as well including updating your insulation and weather stripping, keeping up-to-date with maintenance and cleaning of your furnace and air conditioner or using a programmable thermostat to take advantage of those times when your house is empty or the family is asleep.
Transportation is another major expense for many families. Not only are vehicles expensive to buy but also to maintain and operate especially with gasoline prices at such high levels. Is carpooling an option for any members of the family on at least a part-time basis? Make sure to combine errands and trips to cut down on your travel and save money when buying gasoline by taking advantage of special programs and discounts and remaining vigilant about gas prices. In addition, following a regular maintenance schedule and proper tire inflation can also help you achieve maximum gas mileage for your vehicle.
Choosing your bank wisely can be another way to save money. Make sure the bank you use offers free (or at least low cost) checking as well as electronic bill-paying. Electronic bill-paying and a debit card can cut down on your need to use checks and postage which will save you in the long run as well as help you better manage payments so you will avoid fees, penalties, and higher interest rates.
Cutting your credit card costs can be another major savings. This means making sure you are using the best possible credit card with a low interest rate and low or no annual fee. Shop around until you find your perfect match and don’t forget to cancel and cut up those rejected suitors.
Health care is not really an area where you can cut expenses but you can save money by taking advantage of special offers and programs. For example, many employers offer a Flexible Spending Account where you can save money before taxes for out-of-pocket medical expenses for prescription and nonprescription drugs, dental expenses, and eye care.
Tuning up your insurance policies can also help you save money. When did you last compare rates for your home, your vehicles, and yourself? Some other ways to cut costs are to raise your deductible level or using the same company for multiple coverage (your home and vehicles). When you are shopping around make sure to give your current company a shot at keeping you. Sometimes they can offer a better rate too.
Another major expense for many families is the cost of communication including local and long distance phone service, cell phones, cable or satellite television, and Internet access. Review your expenditures and cut out the services you don’t need. Can some of these expenses be bundled to save money? Are there better plans for your needs?
When looking to save money it is important to become an aggressive shopper. The Internet makes it possible today to compare prices and product reviews while not spending a lot of time and money driving from store to store. Any big ticket item (and that includes your weekly groceries, cleaning products and health and beauty aids) deserves a closer study.
Over the next, month take time to review your family expenses and expenditures in each of these nine areas. Making a few alterations in your family’s spending habits will soon make a difference in the overall household budget. You can raise your family’s quality of life by making just a few changes in your monthly budget.