WW&J McClure - Solicitors and Mortgage Brokers

Critical Illness and Life Cover

Many of us have life insurance. But did you know that you are more likely to become seriously ill than to die before your mortgage is paid off? The fact is that nowadays we are far more likely to survive illnesses which might have killed us 50 years ago.

You may have life assurance attached to your mortgage, but this will only pay out if you die. If you survive, you will still have your monthly mortgage payments and other responsibilities to contend with, at a time when you are least able to cope with unnecessary worry and stress.
One way of ensuring financial security for ourselves and our families should we become seriously ill is to take out critical illness insurance.
Critical illness will pay out to you when you are alive and need the money.

A critical illness policy is an insurance policy which pays out a tax free lump sum on diagnosis of a serious illness (as defined in your policy). The lump sum you receive is for you to use as you wish.

While life cover is essentially a means of providing for your dependants on your death, you should consider critical illness cover whatever your situation.

If you are single, without dependants, you may feel cover is unnecessary, but in fact it is probably more important to you than life assurance. If you become seriously ill, who will support you? And if you are the family breadwinner, you will need to make some provision for your family if you are unable to work.

Ironically, if you do not have critical illness cover, then by surviving a serious illness you may be putting your family in a worse position financially than they would have been if you were to die.

Most critical illness policies will cover the most common illnesses:-
Other illnesses that most policies will also cover include:-
You may think that it won't happen to you, but the facts speak for themselves. For example, every year 150,000 people have non-fatal heart attacks and one in 3 people in Britain will have cancer at some time during their life.

It, therefore, makes sense to make provision for yourself and your family should the worst happen.

Critical illness cover can be taken out on its own, or as an addition to a life insurance policy.

Term assurance is the cheapest and most straightforward form of life insurance. In exchange for payment of a fixed monthly premium, it offers cover for a specified number of years. Its most common use is in connection with a mortgage, but term assurance is not restricted to people with mortgages. The proceeds can be used for any purpose, for example, meeting funeral costs or helping out with a partner's ongoing day to day living expenses; or school fees.

Whole Life Assurance on the other hand, unlike term assurance, is not limited to a specific period. The sum insured will be paid out, no matter when you die and for this reason whole life is usually more expensive than term assurance.

Whichever type of cover you decide to take out ideally it should be arranged at the same time as the mortgage, but even if you presently have a mortgage but no cover, or inadequate cover, or even no mortgage at all, it is not too late to ask us for advice and a quotation. We are independent Financial Advisers, authorised by the Law Society of Scotland to conduct investment business, including life insurance and related business. We are not tied to any insurance company and have an obligation to provide you with best advice, unlike tied agents who sell the products of only one company. We can almost certainly save you money by fixing you up with the right company.

Life Cover Example

Premium for £50,000 life cover, including critical illness, over 25 years based on male life aged 30 years:-

Company A: £ 10.50 per month
Company B: £ 20.00 per month

Difference over 25 years term £2850
Mortgage Payment Protection Insurance is another type of cover which all house purchasers should consider. If you fall behind with your mortgage repayments and cannot catch up again, you could eventually lose your home. But you can take steps to protect yourself against this risk by taking out Mortgage Payment Protection Insurance (MPPI).

Mortgage Payment Protection Insurance (MPPI) pays your monthly mortgage payments for a specified period if you suffer accident, sickness, or unemployment.

You pay a premium each month while the mortgage is running. If you become unemployed, or unable to work due to accident or sickness, the policy starts to pay out (usually direct to your lender) to pay your mortgage.

To keep the cost of the insurance down, there are some periods where you will not be covered (you should check the individual policy for exact details). The mains ones are an "exclusion period" of up to 60 days when you first take out your policy, during which any claim for unemployment will not be met (although claims for accident or sickness would be paid). In addition, there is an "excess" or "waiting" period of up to 60 days for each claim, during which no payments will be made.

If you have a joint mortgage the MPPI can be set up so that it covers both of you, usually by allocating a proportion of the MPPI to each person (eg. 50/50 or 60/40). If one person needs to claim, then the amount of the benefit payment will be the proportion of the MPPI allocated to that person. It is also possible to allocate the MPPI on a 100/100 basis, so that 100% of the MPPI is paid, even if only one of the joint borrowers loses their income. This type of arrangement will generally require higher premiums.

If you would like more information or a written quotation please contact us.
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