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Critical
Illness cover
This ensures that if you were diagnosed with a
specified critical illness such as specific forms of cancer, heart disease or a stroke then the
mortgage would be repaid provided that you survived beyond a certain period
which can be up to 28 days.
Often the plan will include life cover so that even if you died the sum assured
would still be paid.
This type of cover means that you wouldn't have to worry about paying your
mortgage on top of everything else you were going through. Many people who
survive serious illnesses are unable to work again but they still need a roof
over their head.
The cover does vary between different insurance
companies as does the price for example one company may cover just 7 critical
illnesses whilst another covers 34, therefore the cheapest cover isn't always
the best.
The cover can be arranged on a level basis or a
decreasing basis. Level cover means that the sum assured remains the same
throughout the term of the policy. For example a plan for £60000 over a 25 year
term would pay out £60000 if a claim was made in year 2 or £60000 if a claim
was made in year 20. Level cover is usually used for family protection rather
than covering a mortgage but there are some types of mortgages it is suitable
for including an interest only mortgage linked to an ISA investment.
Decreasing cover is recommended to cover a repayment
mortgage as it is designed so that the level of cover decreases in line with the
balance outstanding on the mortgage. It will repay the mortgage balance at any
time during the mortgage term provided that the mortgage payments have always
been met.
Waiver of premium or premium protection is also an important
option as this ensures that, for a few pence increase in the monthly premium, if
you were unable to work due to accident or illness after a certain period say 6
months the premiums would be covered. This means that you are not in the
position where you have to cancel valuable cover when you may need it the most
because you can't afford the premiums.
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