Why do you need life or critical illness insurance?

Taking on a mortgage is a big commitment: it is vital that you get the right advice from the start to ensure that you get the right type of mortgage for your circumstances, at the right price. But once you've found the ideal mortgage, it is important to consider how you would pay that mortgage if the worst should happen.

If the main breadwinner in your house were to be diagnosed with a critical illness, or die, then how would you meet the monthly mortgage repayments? A mortgage is a large debt, secured against your home - if you cannot repay it each month the lender has the right to sell your house to get their money back.

Taking out adequate life and critical illness insurance is considered by most to be a sensible precaution. For a small monthly payment, you gain the peace of mind that comes from knowing that your house will always be your home.

You could take out life insurance and/or critical illness insurance for more than the value of your mortgage - to pay for private medical treatment, or to make adaptations to your home or even just to pay for a much-needed break. But at the very least, taking out cover that would pay the outstanding balance on your mortgage if you (or the main earner) were to die or suffer from a critical illness is a must.

There are several different types of insurance you could opt for, including:

• Term assurance (usually designed to pay off your remaining mortgage and is only guaranteed if you die within a specific time period)
• Whole of life (this provides a guaranteed payment and will pay out a lump sum on your death and is often used to provide an income for those left behind, or to pay for funeral care, for example)
• Family income benefit (this will pay out a regular tax free income until the end of the term which will be a set amount each month or each year to minimise the damage to a family's income by the death of a wage earner)
• Guaranteed 50 Plus life cover (for a fixed premium each month, a lump sum is paid after your death).

The most common policy is term assurance. This is intended to pay off the debt you owe, leaving your loved ones with a roof over their heads and fewer financial worries.

However, the right plan for you will depend on several issues such as your age, weight, state of health and many other factors that insurers take into account when working out how much you should pay each month for one of their policies. This is because they want to work out the risk involved - how likely is it that you will actually need to claim against your policy? If it is very likely, then you should expect to pay a higher monthly premium; if you are young and in good health, you should expect to pay a lower amount.

With so many insurance companies around, each offering so many different types of policy for different premiums, getting a little help to wade through the options is a good idea. We can offer advice about a wide range of policies available from a wide range of insurers - we are impartial, meaning that we are not tied to a particular insurer and are under no duty to 'sell' you a policy from one insurer (so we can offer you the best deals around). If you would like to discuss your life or critical illness insurance needs, whether or not as part of taking out a mortgage, we are here to help, so please feel free to get in touch.