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Question asked by Kashif Ahmed
For mortgage protection do you need Critical Illness Cover? Is it worth taking out this type of insurance?
Firstly, Critical Illness Cover is often added to Mortgage Life Insurance so the loan is not only protected against the risk of death but also against the risk of suffering a serious illness or injury. The combined plan would pay out a lump sum upon death or diagnosis of a critical illness.
Critical illness plans usually cover around 40 specific medical conditions, which are set out in the policy terms and conditions.
Most serious illnesses are covered such as cancer, heart attack, stroke and multiple sclerosis, along with many serious physical injuries such as loss of limbs.
Whether you need Critical Illness Protection will depend on your specific situation so it is best to run through with an adviser.
As a starting point it is important to consider whether you would be able to keep up with your mortgage repayments if you suffered a critical illness.
It might be the case that your employer provides you with Income Protection as an employee benefit, in which case you may not need to double-up on cover.
If not, and you don’t have any other forms of sickness insurance, then it is definitely worth considering this type of cover, especially if you have a family to protect.
You may want to consider a Long-Term Income Insurance plan rather than Critical Illness Cover. This type of policy could pay out a monthly benefit to cover mortgage repayments for the entire term of your mortgage.
For most workers it is possible to gain cover for your ‘own occupation’, so the plan would pay out for practically any medical condition that prevents you from working in your own job.
Monthly premiums can often work out lower for an Income Protection plan relative to a Critical Illness policy as the insurer would have to pay out a monthly benefit rather than one big lump sum; this is especially the case for low-risk (e.g. office-based) workers.
See our guide to Critical Illness vs Income Protection for more on this.