Some Illnesses Are More Critical Than Others

Your mortgage lender may offer you several financial products including critical illness cover. However, as they are not specialists in this field, you will probably find a better deal elsewhere.

The level of cover on offer is just as important as the premium when looking for critical illness cover. The policies from Nationwide and Alliance and Leicester are particularly limited according to Kevin Carr, who is a senior adviser at LifeSearch, a telephone and online life assurance broker. The Alliance and Leicester covers only eight critical illnesses, with Nationwide covering just 10, whereas the market leader, Swiss Life, covers 38.

Loss of speech, deafness, blindness, diabetes, Aids and Parkinsons are some of the conditions not covered by the two High Street names. Mr Carr says that it is not worth considering a policy, which covers less than 25 ailments.

An umbrella term included in all policies is 'total and permanent disabilities', This term means you are covered for any ailment, which prevents you from working permanently.

You need to be alert to the wording as some policies cover 'any occupation' whereas others only cover your 'own' occupation. You will not receive a payout under a 'any occupation' policy unless you are totally incapable of carrying out a job, however menial. Therefore Mr Carr advises you sign up for a 'own' occupation policy.

There are a range of companies as well as Swiss Life who offer comprehensive cover including Legal and General, Norwich Union, Standard Life, Scottish Equitable, Scottish Provident, Friends Provident, Liverpool Victoria, Skandia and Zurich Life.

For years life insurance has been promoted by mortgage lenders. This has resulted in critical illness cover never being considered by many people. There are four times as many claims on critical illness policies compared to life policies, when the consumer has taken out both types of insurance.

Life insurance cover is extremely important, especially if you have dependents, as they will welcome the lump sum payment on your death. However critical illness cover should be the priority if you have debts to settle, particularly a mortgage. Mr Carr considers critical illness to be more important as it covers the cost of your house and food, even if you are ill and unable to work.

The premiums will be higher if you are a smoker and will also rise if you are older. A decreasing term policy, which is targeted at people only wanting to cover the cost of their mortgage, is the cheapest. However, a level term mortgage, where the amount of cover remains the same, is recommended by Mike Boles, a director at Savills Private Finance. This is because aspiring homeowners are likely to need larger mortgages, which will require an increase in the amount of cover.