Other financial products

• Types of mortgages

  Know the definition and types:

  • repayment
  • interest only
  • offset
• Islamic Finance Principles


  • Shariah Compliance
  • Asset-Backed Transactions
  • Ethical Investments
  • Risk-Sharing
• Payment Types

  • Variable Rate Mortgage
  • Fixed Rate Mortgage
  • Capped Mortgages
  • Discounted Rate Mortgages
• Variable Rate Mortgage

  • Interest rate fluctuates with prevailing interest rates
  • Borrower benefits from low rates but suffers when rates increase
  • Rate may track the central bank's base rate, known as a 'tracker' mortgage
• Fixed Rate Mortgage

  • Interest rate is fixed for an initial period (e.g., 3-5 years)
  • Borrower is protected from rising rates during this period
  • Redemption penalty may apply if the loan is cancelled before the fixed period ends
  • Borrowers may be locked into the lender's standard variable rate after the fixed period
• Capped Mortgages

  • Protect borrowers from rates rising above a predetermined 'capped rate'
  • Interest rate fluctuates but cannot exceed the cap
  • Provides security against high interest rates while allowing benefit from lower rates
• Discounted Rate Mortgages

  • Lenders offer a discounted interest rate for a specified period
  • Attracts borrowers, including first-time buyers and switchers looking for better rates
  • Helps borrowers transition into homeownership with lower initial costs
• Islamic Finance Principles

  • Shariah Compliance
  • Asset-Backed Transactions
  • Ethical Investments
  • Risk-Sharing
• Shariah Compliance

  Investments and capital-raising methods must adhere to Shariah law, avoiding interest (riba) and uncertainty (gharar)
• Asset-Backed Transactions

  Islamic banking requires assets to be purchased for any business transaction, ensuring tangible value and adherence to Shariah principles
• Ethical Investments

  Funding sources, profits, and investments must not involve unlawful activities according to Shariah law, such as interest-based transactions, gambling, or pornography
• Risk-Sharing

  Risk-sharing and entrepreneurship are encouraged, emphasizing trade and investment in ethical and socially responsible ventures
• Islamic Mortgage Practices

  • Shariah-Compliant Structures
  • Diminishing Musharaka
  • Murabaha
  • Ijara
• Shariah-Compliant Structures

  Instead of traditional interest-bearing mortgages, Islamic banks offer home purchase plans approved by a Shariah Supervisory Committee (SSC), comprised of Islamic scholars and experts
• Diminishing Musharaka

  In the UK and other regions, Islamic mortgages may follow the principle of co-ownership (diminishing musharaka), where the bank gradually transfers its share of ownership to the customer
• Murabaha

  Islamic banks in some regions, like Dubai, offer Murabaha, where the bank buys the property and sells it to the customer at a higher price, with the buyer repaying in installments without interest
• Ijara

  Another option in Islamic mortgages is Ijara, where the bank leases the property to the customer for a specified period, with the promise to transfer ownership after all payments are made
• Overall, Islamic finance principles prioritize ethical and socially responsible financial practices, emphasizing asset-backed transactions, risk-sharing, and adherence to Shariah law in investments and banking operations
• Life Assurance

  • A type of insurance where the insured event is the death of the policyholder
  • Premiums are paid in exchange for life cover, which is a lump sum payable upon the insured's death
• Life Assurance Features

  • Financial Protection
  • Customization
  • Clear Terms and Conditions
  • Affordability
  • Claims Process
  • Financial Stability of Insurer
  • Additional Benefits
  • Review and Adjustment

  
• Financial Protection

  Policies should provide a financial safety net for beneficiaries in case of the insured individual's death, illness, disability, or other covered events
• Customization

  Flexibility in policy terms, coverage options, and payout amounts allows individuals to tailor the policy to their unique needs and circumstances
• Clear Terms and Conditions

  Transparent policy language and straightforward terms help ensure that individuals understand what is covered, excluded, and required of them
• Affordability

  Premiums should be affordable and sustainable for the policyholder over the long term, balancing coverage needs with budgetary constraints
• Claims Process

  A smooth and efficient claims process is crucial during a time of need, ensuring timely access to benefits for beneficiaries
• Financial Stability of Insurer

  Choosing a reputable and financially stable insurance company provides confidence that the policy will deliver on its promises
• Additional Benefits

  Some policies may offer supplementary benefits such as critical illness coverage, accidental death benefits, or waiver of premium options, enhancing the overall value of the policy
• Review and Adjustment

  Periodic reviews with an advisor allow individuals to assess whether the policy continues to meet their evolving needs and make adjustments as necessary
• Basic Principles of Life Assurance

  • Utmost Good Faith (Uberrimae Fidei)
  • Insurable Interest
  • Indemnity
  • Contribution
  • Subrogation
  • Proximate Cause
  • Causa Proxima
  • Mitigation
• Utmost Good Faith (Uberrimae Fidei)

  Both parties, insurer and insured, must act with utmost honesty and transparency, disclosing all material facts relevant to the insurance contract
• Insurable Interest

  The insured must have a legitimate financial interest in the life or property being insured, preventing insurance on unrelated lives or properties
• Indemnity

  Life assurance aims to provide financial compensation that approximates the value of the loss suffered, restoring the beneficiary to their original financial position
• Contribution

  If multiple policies cover the same risk, the insured cannot claim more than the actual loss from any one insurer, preventing over-insurance and ensuring fairness
• Subrogation

  After paying a claim, the insurer gains the right to take legal action against responsible third parties, preventing double recovery by the insured
• Proximate Cause

  Insurers assess claims based on the primary cause of loss or damage, ensuring accurate and fair evaluation of claims
• Causa Proxima

  The nearest and most direct cause of loss or damage is considered when determining coverage under the policy, closely related to the principle of proximate cause
• Mitigation

  The insured has a duty to minimize loss or damage covered by the policy, taking reasonable steps to mitigate the situation. Failure to do so may affect the insurer's obligation to pay the claim
• By adhering to these principles, life assurance policies operate fairly and efficiently, providing financial protection and peace of mind to policyholders and beneficiaries alike
• Types of Whole-of-Life Policies

  • Non-profit
  • With-profits
  • Unit-linked
• Non-profit Whole-of-Life Policy

  Offers a guaranteed sum assured without any additional bonuses or profits