Why include critical illness cover with mortgage protection life insurance?

There are many forms of mortgage protection cover available in today’s insurance market. The most common types of cover include mortgage protection life insurance and payment protection. It is possible, however, to include critical illness cover with life insurance to protect the policyholder against serious illness or injury.

It is very common for individuals to take out life insurance to protect their mortgage loan. As life insurance only pays out if the policyholder were to die or suffer terminal illness this type of product is really a form of family protection. The family of the deceased policyholder would be able to use the funds to repay the home loan which would enable them to continue living in their family home. This is the key benefit of mortgage protection life insurance.

The inclusion of mortgage critical illness with a life policy transforms the coverage into not only family protection but also into personal protection. The policy would now payout if the policyholder suffers a serious illness (a critical illness set out in the policy document) or dies. This means that if the policyholder suffers a critical illness they would not have to worry about making monthly loan repayments as the funds paid out from the policy could be used to repay the loan in full.

The two main types of life insurance for mortgages are level term insurance and decreasing term insurance. Level term cover can be used to protect an interest-only loan and decreasing term cover a repayment loan. Critical illness can be combined with both of these products. In the case of decreasing term insurance, both the level of life and critical illness cover will decline over time so that the sum insured remains consistent with the amount of debt outstanding on the loan.