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.
27 July 2007 14:11:03
UK life insurance
firms must update their protection policies to stay relevant to modern life, according to one market expert.
Susan Ring, chief executive of protection firm Unum, told delegates at a Berlin conference that medical advancements meant life cover and critical illness policies had to adapt to stay current.
Ms Ring told the conference that family histories would become less relevant to pricing applications for critical illness cover, as heart attack and stroke incidence improves.
"I would question the future relevance of some of the current critical illness products, given the reduction in incidence of conditions often typically covered by these," she said.
"Maybe a fresh look needs to be taken at long-term care given that people will be in the workforce for longer and their car needs are likely to be different. For healthcare, there will be more of a need and potential opportunity for treatment relating to mental health conditions."
Friends Provident recently announced that they would show lenience when non-disclosure mars a critical illness claim.
16 October 2007 13:33:31
Women living with HIV are suffering a gap in communication with healthcare providers about treatment, according to reports.
A survey from Women Living Positive focussed on HIV sufferers' access to information about treatment options that best suit their individual needs.
The results of the poll, supported by independent pharmaceutical firm Boehringer Ingelheim, showed that 55 per cent of female patients had not discussed how treatments may affect women differently.
Over nine in ten of those who enquired about such matters said they got a satisfactory response, with a similar proportion of respondents revealing they felt comfortable about asking questions on the matter.
"With the rise of HIV infections in women, it is important to understand their struggles and unique issues when evaluating their care and treatment options," commented Kathleen Squires, director of infectious diseases and environmental medicine at Thomas Jefferson University Hospital.
She added that women should engage in discussions about their emotional welfare, as well as family planning considerations, with healthcare professionals.
Earlier this year Boehringer Ingelheim noted the efficacy of Viramune as a treatment for the HIV-1 infection, pointing out that women are at greater risk of experiencing adverse effects of the medication.
Direct Life and Pensions Services Ltd are one of the UK's leading providers of life insurance, term life assurance, mortgage protection, critical illness and life insurance advice
27 June 2008 08:07:39
Childhood obesity is reaching epidemic proportions in the UK, according to the National Obesity Forum.
Recent figures from the Office for National Statistics (ONS) have shown that one in ten children are already obese by the time they start primary school and that a further 20 per cent of children are overweight.
In a further report published by the government's foresight program, it is revealed that obesity levels have more than doubled in the past 25 years and that a quarter of all adults are now classed as obese.
Dr Colin Waine, chair of the National Obesity Forum, has identified childhood obesity as a major problem for the UK.
"The growth of childhood obesity has to be regarded as one the most urgent public health problems that we have to address," he said.
"It is very serious. In regards to the health of children, it is the most damaging problem that we have at the present time."
The Health Survey for England conducted in 2004 predicted that by 2050 approximately 25 per cent of under 20s will be clinically obese.
Obesity in childhood is linked to many health problems in later life including heart disease, cancer and diabetes - this is because many of the risk factors involved in these diseases such as high cholesterol, blood pressure and triglyceride levels, can be followed from childhood to adulthood.
The estimated cost of the consequences of this would be £6.5 billion for the NHS alone - while additional impacts, such as a high proportion of the population unable to work, would take the total bill to £49 billion.
Radical action is needed according to some figures and in January the government launched the 'Healthy Weight, Healthy Lives' strategy which aims to reduce the proportion of overweight and obese children to 2000 levels by 2020.
However it has been reported that the current measures are not having the desired effect - in the Annual Performance Assessment (APA) of children’s services, it was found that there was "little evidence of impact" from the millions spent on programmes intended to help improve children's health.
Dr Waine said that we the need to alter the diet of children because this are likely to have shorter life expectancies then their parents.
He explained: "We do need radical action. It needs individual action by clinicians [and] public health action by local and national government to really get the food and drink industry to collaborate to produce a healthy diet, which has much less saturated fat, calories and salt."
In January of this year the government announced a new child obesity strategy which would include; a national programme to weigh four to five and ten to 11 year-olds; measures to improve nutrition in schools; traffic light food labelling; the five-a-day fruit and vegetable campaign; making routes to school safer to promote walking; revamping playgrounds and restrictions on junk food advertising.
