Topic 16 - Financial protection and planning (UNIT 5)

Question 1

What are the most common causes of arrears and repossession of mortgaged properties

Answer 1

Unemployment and redundancy

Divorce and
separation

Question 2

In some ways, the need to provide adequate protection against the financial effects of illness or disability is greater than protecting against the effects of premature death. Why is this?

Answer 2

On the death of an individual, those left behind have to cope with a changed situation. Death may bring many adverse financial outcomes but the need for large financial outlay is unlikely to be one of them

In the event of illness or disability, the consequences may be more acute: not only is there the possibility that an income earner can no longer work or that a homemaker can no longer do household jobs; they may also need medical care, personal care and adaptations to the home and in lots of cases this is unprotected and cannot be afforded

Question 3

Explain the issues of having a lack of protection on a mortgaged property on a tenants in common basis

Answer 3

If the property was registered as tenants in common, the deceased’s
equitable share will pass according to their will.

The survivor will be jointly and severally liable for the mortgage, so could end up with the whole mortgage but effectively only own half the value of the property.

Question 4

For a young, single person what type of insurance is likely to be the priority. Explain rationale

Answer 4

Protection in the event of illness or accident is likely to be important for them to maintain their standard of living if they are unable to work.

Protection against the financial effects of critical illness or unemployment
is also likely to be significant

Protection of death will likely not be important as they have no dependants

Question 5

What is private medical insurance?

Answer 5

PMI provides cover for medical expenses and allows an individual access to private medical treatment, so they are not entirely reliant on the NHS and can avoid NHS waiting lists.

PMI is aimed at covering acute conditions, which develop rapidly
and respond to treatment