Helen Jeffreys is 27 and following the purchase of her first property, with a mortgage of £100,000, is looking to purchase a critical illness plan. Helen is a non-smoker and in good health, however, her mother was diagnosed with multiple sclerosis aged 48. There is no other family history of the disease. Would any exclusions or loadings apply to the plan and if so, which would be the best policy to meet her needs?
Helen should consider a policy providing both life cover and critical illness (CI) protection – generally a cheaper option than a standalone CI policy.
Decreasing term assurance would be most suitable to run alongside a repayment mortgage, as the cover would decrease in line with the outstanding amount on the mortgage. Level term assurance would pay out a fixed amount in the event of death during the term, and would be suitable for an interest-only mortgage or for general cover.
A decreasing term assurance plan incorporating death or earlier CI cover for £100,000 over 25 years would cost as little as £15.20 a month, whereas a level term assurance plan would cost £21.37 a month, subject to underwriting by the insurer. These costs could be reduced initially by opting for reviewable premiums, although the monthly cost would probably rise after five years.
All life companies ask questions on family medical history and some specifically ask about multiple sclerosis. So in some cases, the fact that Helen's mother has been diagnosed with the disease may be taken into account when the insurance company is assessing Helen's application.
Once Life Policies Direct has found the most competitive provider, we call its underwriting department for an indication of how an application would be viewed. After all, it is better to consider any possible problems sooner rather than later.
Gerry Warner, Standard Life
Helen reveals no significant medical history, and there are not any concerns over her weight, occupation or recreational pursuits. However, her family history suggests to insurers she has a higher-than-average risk of being diagnosed with multiple sclerosis (MS).
While we would be able to offer her life cover at normal rates, we would have to impose adverse terms on her critical illness (CI) cover. We could offer her the usual CI benefits, including the condition of MS, in return for a premium increase. Alternatively, Helen may prefer to pay the normal premium for the cover and have the condition of MS, and several others that MS sufferers would be more likely to claim under, excluded.
Helen has asked for a CI plan. As a single person, she does not have the same need for life cover as she would if she had a partner or family. The basic premium for cover, which reduces over the term of the plan, would be £24.82 a month. Level cover would be available by increasing the premium to £28.27.
If Helen accepts the rating and opt for full cover (without exclusion for MS), the premiums would increase to £35.91 and £41.08 respectively for the reducing and level plans. While life cover may not be particularly important to Helen as a single person, it is worth noting it could be included for a relatively small increase in the basic premium. The £24.82 for decreasing cover would increase to £25.96, while the premium for level cover would rise from £28.27 to £30.18.
Matt Rann, Scottish Equitable Protect
Helen is buying her first house and although she is making this commitment on her own at the moment, her circumstances may change and she should therefore look to add in life cover in the form of a combined life and critical illness (CI) policy or a standalone life-only contract.
In addition, she should consider income protection (IP) to cover a proportion of her salary, particularly if she has financial commitments, or as a minimum to cover her mortgage repayments. As her circumstances may change, a menu-style product such as Scottish Equitable Protect's Personal Protection menu would allow her the flexibility to adapt her policy.
From an underwriting perspective, Helen's family history means she could be covered for CI, but with an exclusion of any claim arising from multiple sclerosis, or any disease of the central nervous system. This exclusion would apply to any associated total and permanent disability cover. It would also apply to any IP cover or waiver of premium benefits she chose to take alongside. The good news is that life assurance cover would be provided on standard terms.
