Illness Insurance For Mortgage - Income Protection and Critical Illness Cover
What is Critical Illness Cover?
Better off Dead? - We’ve all heard the phrase…
Critical illness cover is a type of insurance that protects you in the event of a serious illness or injury.
Should you be diagnosed with an illness that your policy covers, typically you’ll receive a tax-free, one-off payment. There are no restrictions on how you can spend the money, but a pay-out could help support private medical care, or ease the financial concerns that may come from being off work long-term. For example, the money could be used to:
Pay off your mortgage
Cover loss of earnings/monthly household bills
Fund private care or treatment, avoiding wait times
Ensure your quality of life remains in tact
With most policies now covering 60-70 different illnesses, paying out on 92% of all claims paid out (as per Aviva’s 2021 claim rate) - it’s no wonder that people are now coupling critical illness cover insurance with their life insurance, to fully protect against their mortgage.
How to claim on a critical illness cover insurance
Should you be diagnosed with a critical illness, you’ll need to contact the insurance provider as soon as possible. This is easy with most providers as a claim can be made via phone or online.
Your provider will review your claim as quickly as they can, often within a week or two, and may contact your GP or consultant if further medical evidence is needed to support your diagnosis/claim.
If your claim is successful, you’ll receive a single lump-sum payment into your bank within days of approval. How long it takes to process the claim will vary among providers.
Income Protection Cover Insurance - How does it work?
If you’re sick or injured and need to take time off work, income protection will pay you part of your monthly income. Typically, income protection will pay 60% of your gross salary (before deductions).
You decide how much you need per month, and then you choose how long the ‘deferment’ period is (how long you could survive before it starts to pay). The longer the deferment period, the cheaper the cover. If you have 3 months full pay and 3 months half pay via work, you may wish to select £1,500 per month, to start after 6 months.
In comparison to critical illness cover, income protection insurance only pays monthly and not as a lump sum, but can pay out for a larger range of conditions from serious life threatening illnesses, to bad backs, broken legs, mental illnesses. All you need is a doctors note confirming you are unable to work.
The pay-out from an income protection policy is tax-free and can help you protect your monthly bills while you recover. The money can cover anything, like bills, mortgage repayments, rent and childcare costs. Because you don’t pay tax on your monthly payments, it should replace most of your salary, and continue to support the life you live.
Often called loss of income insurance, salary protection insurance or income insurance - they’re all the same thing.
Income Protection For Self Employed?
As those who are self employed don’t have anything in the way of employer benefits, income protection is often seen as the perfect solution. Unlike a critical illness cover that will only pay once diagnosed with a specific condition, income protection can pay for any reason as long as you are signed off by a doctor and deemed unfit to work.
As such, self employed individuals could have the cover take effect after 1 or 4 weeks of not being able to work, meaning they are protected a lot sooner and will receive a pay out a lot quicker, when compared to critical illness covers.
Our expert Mortgage and Protection Advisors offer fee free advice for all protection advice. Whether looking for the cheapest life insurance, or wanting to find an illness package to protect your family and lifestyle. Call one of our team based in Newcastle Upon Tyne, for mortgage protection advice.
