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
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Answered by Andrew Jenkinson

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 (called a ‘critical illness condition’). The combined plan would payout a lump-sum upon death or the diagnosis of a critical illness.

What does critical illness insurance cover?

Critical illness plans usually cover between 33 and 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.

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

It is also worth considering a long-term income insurance plan rather than critical illness cover. This type of policy could payout 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 payout 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 payout a monthly benefit rather than one big lump-sum; this is especially the case for low-risk (office-based) workers.

See our guide to Critical Illness vs Income Protection

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This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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