Most homebuyers purchase life insurance when they arrange a mortgage, but only a minority will take up another form of financial protection that is five times more likely to pay out.
Critical illness cover pays a tax-free lump sum on diagnosis of any one of a list of serious (critical) illnesses, including cancer and heart attacks. Claims statistics suggest you are five times more likely to suffer from one of these than you are to die before you reach the age of 65.
The results of a survey carried out by Macmillan Cancer Support showed just how many people lost their home after being diagnosed with cancer. As many as one in six had difficulties keeping up rent or mortgage payments. For those who were self-employed, the figure was higher still. As many 17,000 people lose their homes each year through critical illnesses such as cancer.
Macmillan’s chief executive Peter Cardy argues that understanding by mortgage companies and the provision of financial advice to sufferers could make a big difference. “This is shocking,” he says. “Having cancer should not cost you your home.”
After being diagnosed with cancer, or any critical illness for that matter, people often face a drop in income, or lose it altogether, at the same time as they face a number of extra costs including prescription charges, hospital parking costs, special diets and high fuel bills. These financial pressures can lead to people struggling or falling behind with their rental or mortgage payments.
Penny Williams was diagnosed with bowel cancer in 2009. Married with four children, she had been the breadwinner, with her husband looking after the children and their home. After being diagnosed, Penny had to give up her job, as she would regularly be called into hospital for treatment at short notice. Her husband couldn’t go to work, because Penny was too unwell to look after the children. Switching the mortgage from repayment to interest only reduced some of their costs, but the bills didn’t stop and they soon ran into trouble, maxing out credit cards and borrowing from family until they were in a corner.
“When you’ve been diagnosed with cancer, your main aim is to survive,” says Penny. “When the financial problems start, you feel like you are being punished and the pressure itself can make you ill and set your health back several steps. The physical trauma of being diagnosed and going through treatment is bad enough. Add financial stresses to that, and it makes things that much worse. When you’re ill, you want everything to be taken care of for you. The last thing you need is the bailiffs coming knocking on the front door.”
“Too many people are facing overwhelming financial pressures at a time when they are fighting to live,” says Cardy. “Borrowing money, moving in with family, selling up or moving to help make ends meet or repossession just doesn’t seem fair when you are sick and fighting to stay alive.”
One of the possible solutions is in taking out critical illness cover. “It’s amazing how many people seem to be unaware of the benefits of critical illness cover, says Antony Lopez, senior consultant at Sterling & Law.
“If it was down to me, I would make critical illness cover compulsory with every property purchase – especially for first-time buyers. It is relatively cheap when you are young and is five times more likely to pay out than life cover. Typically, subject to underwriting, a premium of 10% of your mortgage repayment would provide significant cover. Sounds like a no brainer to me.”