Mortgage Protection Life Insurance is designed to repay the outstanding balance of a repayment mortgage in the event of death (or earlier critical illness).
A repayment mortgage is a mortgage loan where each month the interest due and some capital are repaid.
During the early years relatively little of the loan is repaid each month with larger amounts repaid later in the term.
The Mortgage Protection Life Insurance (and/or Critical Illness) premiums are determined at outset and are usually guaranteed for the term of the policy. Reviewable premium plans are available, but again these are not widely sold. The graph below shows how the sum assured falls over the policy term in the same way that the amount of capital outstanding on a repayment mortgage falls over time.
Not all mortgage protection life insurance and critical illness insurance plans pay the same amount on claim. This is because the different insurance companies use different ways to work out how the life cover should fall over the term. There are basically two ways that are in common use.
The first method……is to assume a fixed mortgage interest rate, typically 10%, and reduce the amount of life insurance and critical illness cover in line with this assumption. This means that irrespective of the mortgage amount outstanding, the life insurance and/or critical illness insurance payable at claim will be that which would have been payable assuming the mortgage had been run at an interest rate of 10%.
You can see from the graph below that the amount payable during the life insurance term increases with interest rate. A policy that assumes an interest rate of 10%, pays more than a policy that assumes an interest rate of 5%, half way through the plan term.
Also it is worth noting that the life insurance or critical illness insurance payout is not linked to the mortgage and may therefore payout more than the outstanding balance if average interest rates have been lower than the assumed interest rate of 10%, or less if interest rates had been higher than the assumed rate. Furthermore the life insurance cover or critical illness insurance cover will be paid irrespective of whether there is a mortgage outstanding or not.
The second method……is to guarantee the repayment of the outstanding balance of the mortgage, irrespective of interest rate. This method offers guarantees but is usually subject to certain criteria. These can include, ensuring that the mortgage protection plan is set up for at least the amount of the mortgage outstanding in the first place, and over the same term. Furthermore mortgage payments must be up to date at the date of claim, which could be more of a problem if the claimant has been unable to work for a period due to ill health and has become behind with mortgage payments just before death. Under these circumstances if there is no mortgage in place when a claim is made then the policy usually works as per method one above but might assume quite a low interest rate (typically 5%) to work out the sum payable.
06 August 2008 17:22:31
Those without life insurance policies will be pleased to hear about a proposed program that involves vaccinating children against flu in order to provide protection for the rest of the population.
Whilst the Daily Mail claimed that running the programme could cut flu infection rates by 70 per cent, the Daily Telegraph reported that "flu could be virtually wiped out if all under 16s were vaccinated against the disease".
A similar programe was considered and subsequently rejected in 2006 by the Joint Committee on Vaccinations and Immunisation, the NHS reported.
New research published in the Lancet this week suggested that the influenza vaccine did not provide as much protection as was previously thought.
In the study a group of 3,500 individuals were tested and it was uncovered that in those over 65 there was no link between the flu vaccination and the risk of those people contracting pneumonia.
UK life insurance provides cover in case of injury or illness.
05 August 2008 17:34:54
Those with and without life insurance policies may be interested to know that a trial of a vaccine for HIV patients which allows them to take breaks from their regular medication is planned, the BBC reported.
The trial, which was announced at the Aids 2008 conference in Mexico City, will involve 345 patients in both the US and Europe and the results are due by the end of 2009.
It is hoped that the vaccine could help alleviate side effects associated with the drugs currently used to treat the virus and may help delay the emergence of strains of HIV that are resistant to the drugs.
Dr Barry Peters, of Kings College London, who is leading the research in the UK, said: "A successful immunotherapeutic HIV vaccine would give patients and doctors enormous advantages over current treatments, both in developed and developing countries."
Whilst Dr Peters has qualified that the vaccine being trialled is not the "complete answer", it could go some way to helping produce a "full" vaccine.
UK life insurance provides policy holders with cover in case of illness or injury.
05 August 2008 17:32:20
Large doses of Vitamin C intravenously administered to mice have succeeded in reducing the size of their tumours and it is hoped that it could prove effective in humans in the future.
The study, published in Proceedings of the National Academy of Sciences, has shown that the way Vitamin C is administered makes a "huge difference" to the outcome of the trial.
According to the Associated Press, injecting the mice with Vitamin C led to a chemical reaction which produced "tumour-toxic hydrogen peroxide".
Reaction in the mice was positive as the chemical that was produced damaged the membranes, metabolism and DNA of the cancer cells, but did not appear to harm healthy tissue.
Whilst the results have been positive, those without life insurance policies may be interested to know that it was noted that further trials in humans are required before the treatment can be used to help fight cancer.
In the 1970s Dr Charles Moertel conducted tests to establish the efficacy of vitamin C in treating cancer patients but his trial showed no benefit to patients. This trial however, administered the vitamin by mouth.
UK life insurance policy holders may be affected by cancer at some point in their lives.
