Depending upon the type of mortgage you have obtained, mortgage decreasing term assurance or a level term assurance policy will be appropriate to protect your mortgage. In addition to either of these policies you have the option to obtain critical illness cover which will provide a lump sum payment.

Mortgage Decreasing Protectiong Assurance is a type of term assurance policy. It works by recognising that the main purpose of insuring your life is to pay off your mortgage if the assured person dies during the fixed term.

Mortgage decreasing term means the initial sum assured amount decreases over the term of the policy. This cover is designed to protect a repayment mortgage, so that the amount of insurance decreases roughly in line with your remaining mortgage debt. Should the person assured survive, there will be no benefit.

Level Term Assurance is a fixed-term policy, meaning that the assurance will last for a certain period of time. The policy will pay out a guaranteed sum only if the assured person dies during the fixed term. Should the person assured survive, there will be no benefit.

It is very important to understand the concept that if you are to live until the end of the term, your policy will expire and no payment will be made. There is no surrender value either, so if you stop paying the premiums at any time, your cover will cease. Sometimes you can ask for a waiver of premium whereby you pay extra so, should you lose your job during the term, you can take a break from paying premiums but still be covered.

The premiums will remain level throughout the policy. They are set on application and will depend on some variables connected with the person looking for the assurance. Essentially, the assurance company is laying a bet on your chances of dying during the term. The older the person is, the higher the premium will be. If the person smokes, their premium will be higher. Obviously, the longer the term, the higher the premium. Also, the higher the amount that is covered by the policy, the higher the premium will be.

Critical Illness Insurance is designed to provide you with a lump sum payment on the diagnosis of certain listed illnesses such as cancer, heart attack, stroke or a permanent disability.

The proceeds from a critical illness policy can be extremely useful for adapting to a new lifestyle, paying for medical treatment or simply covering the bills whilst you recover.

The money can be used however you wish so all you need to decide is how much cover you and your family would need.

A serious illness, such as cancer or heart attack, affects one-in-four women and one-in-five men before retirement age. Critical illness insurance is designed to ease the financial pressures by paying a tax-free lump sum if you become seriously ill or totally disabled. You must normally survive at least one month after becoming critically ill, before the policy will pay out.

What is Covers:
Critical illness insurance pays benefits on the diagnosis of certain specified critical illnesses. The range of diseases covered has increased to more than 30, though contracts differ from one company to another.

All policies should cover seven core conditions. These are cancer, coronary artery bypass, heart attack, kidney failure, major organ transplant, multiple sclerosis and stroke. They will also pay out if a policyholder becomes permanently disabled as a result of injury or illness.

But not all conditions are necessarily covered. In May 2003, insurers adopted new rules set by the Association of British Insurers, that tightened the conditions under which customers could claim on critical illness insurance (CII) policies.

The changes mean that policies won't cover conditions such as non-invasive skin cancers, and less advanced cases of prostrate cancer. Tumours that have not yet invaded the organ or tissue, and lymphona or Kaposi's sarcoma in the presence of HIV are excluded.

There are also more restrictive conditions for heart attacks. There has to be evidence of typical chest pain, or changes in the electrocardiogram (ECG), for example, if a claim is to be successful. Cardiac conditions, such as angina, will not be covered.

For single people with no dependants, critical illness cover that pays off the mortgage is more important than having life cover, as it means you have fewer bills or a lump sum to play with if you are very unwell.

But it can also be useful if you are part of a couple. It provides a welcome financial boost at a time or emotional stress and financial hardship.

Registered Office: Middleborough House, 16 Middleborough, Colchester, Essex CO1 1QT.
Registered in England No. 2169477. Consumer Credit Licence No. 233869.

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