Ben Burgess is senior protection adviser at LifeSearch
Taking out decreasing life and critical illness cover for the full amount and term of the mortgage is a tried and tested means of long-term illness protection.
It’s a classic in every sense of the word and has had a huge impact in the lives of countless policy holders.
But is critical illness (CI) cover always the best fit? What about the many UK workers whose company sick pay benefits aren’t enough, at one month of full pay or less?
What about the 15% of the population and rising who are self-employed? If these individuals don’t have substantial savings, they’re not going to be able to pay their mortgage.
Their injuries and illnesses are keeping them from earning money, but if they don’t meet the definitions of a critical illness outlined in their policy documents, they are significantly at risk. Even if they can pay the mortgage, via a CI policy or otherwise, can they afford to pay all the other bills as well?
According to the Office for National Statistics: “The four most common reasons for sickness absence in 2018 were either minor illnesses, musculoskeletal problems, ‘other’ conditions, and mental health conditions (including stress, depression and anxiety).”
More and more consumers are turning to income protection to meet their illness cover needs. They are drawn to the fact that they don’t have to meet a policy definition to continue to make their mortgage payments.
They also appreciate that it can be claimed upon as often as they need and essentially serves as privately funded sick pay. Income protection with a 1- or 2-year claim cap or age-costed premiums with Holloway and the British Friendly Society offer cost effective solutions for clients on every end of the budget spectrum.
Income protection is something people are investigating more than ever before. Most enquiries are coming from self-employed people or those who have low levels of company sick pay.
Are critical illness and income protection mutually exclusive? As advisers we know the answer to that question is a resounding no; however, it is our job make sure that clients are given all the options, not just the easiest one, or the cheapest