When arranging a mortgage, most people only focus on getting the loan agreed and moving into their new home. But what often gets overlooked is how that mortgage will continue to be paid, if something unexpected and nasty happens. That’s where life insurance and critical illness cover come in. Many people ask me about the difference between life insurance and critical illness cover, and which one is really needed. Let’s break it down in simple terms.
Life Insurance: Protecting Your Family If the Worst Happens
Life insurance pays out a lump sum if you die during the mortgage term. It’s designed to provide financial security for your dependants, ensuring they are not left struggling with mortgage payments or bills. For many clients, the most important part of life insurance is that it can pay off the mortgage in full, so the family can continue living in their home without financial pressure. This type of family protection insurance is essential if you want to know your loved ones can stay secure in the property, no matter what happens.
Critical illness cover is different, because it pays out a lump sum if you’re diagnosed with a serious condition such as cancer, a stroke, or a heart attack. This payout happens while you’re still alive, and comes at the very moment you need it the most. It is easily and clearly explained as cover that helps when your income might stop, but your mortgage and bills don’t. The money can be used to cover living costs, medical treatment, or mortgage payments while you’re unable to work. It gives you the freedom to focus on your health and recovery, rather than worrying about how the rolling bills will be paid every month.
The Key Differences Between the Two
- When it pays out: Life insurance pays on death; critical illness pays when you’re diagnosed with a covered illness.
- How the money is used: Life insurance supports your family after your death; Critical illness cover supports you and your family during treatment while you’re still very much alive.
- Who benefits: Life insurance benefits your loved ones and dependants. Critical illness cover benefits you directly, and also protects your family from financial strain at the very worst time.
This is why so many people ask: ’Which is better, life insurance or critical illness cover?’ The honest answer is that neither is better than the other, they just work differently, and both can be extremely important if things take a turn for the worse.
Do You Need One or Both?
A very common question is: ‘Do I need both life insurance, and critical illness cover?’ The truth is, it all depends on your circumstances, and every case is different. Many people choose to have both, as together they provide a more complete safety net. The right choice depends on your family situation, dependants, mortgage size, savings, health risks, and job security. As your protection advisor my role is to review all of this for you, and recommend exactly the right balance of cover.
Common Questions I’m Asked As An Advisor
Do I need both policies?
Not always, but many clients find that having both gives the best peace of mind.
What if the cost is too high?
Cover can often be adjusted. The amount or term of cover can be changed, keeping monthly premiums affordable.
What illnesses are covered under critical illness?
Policies differ. Most include major illnesses like cancer, stroke, or heart attack, but the exact list can vary.
Can I add or remove conditions?
Some policies allow flexibility, so it’s worth checking what’s available.
Why Independent Advice Matters
The truth is that every single family’s needs will be different. Getting independent advice means you’ll have someone to compare all the options for you. It ensures you find the right balance of cover without overspending or making incorrect shortcuts. It is vital to get the application correct at the time of submission, as even a small mistake made when applying yourself could lead to a claim being rejected later.
I’m Ian Smith, a mortgage advisor who arranges hundreds of mortgages every year. Alongside helping clients secure the best mortgage deals, I also make sure families are protected if the unexpected happens. The cost of cover is often less than people think, and when it’s needed, it’s one of the most valuable decisions you’ll ever have made.
Once your cover is in place, you can sleep well at night knowing your mortgage and family are protected if the worst should happen. Let’s have a chat. Get in touch today, book an appointment, and we’ll look at exactly what protection you and your family need to stay safe in your home.
