Do I Need Critical Illness Cover to Protect My Mortgage?

For mortgage protection do you need Critical Illness Cover? Is it worth taking out this type of insurance?

Question asked by Charlotte Khan

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.

What Does Critical Illness Insurance Cover?

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.

Do I Need Critical Illness Insurance?

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.

Income Protection as an Alternative to Critical Illness

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.

I had a great experience with Drewberry, they have a lot of knowledge and expertise with life insurance and income protection and were able to advise me and arrange suitable products. Highly recommend.

Lachlan Mellings
12/08/2020
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