One policy. Two protections.

Decreasing or level, and why it matters

This is the question people arrive at this page asking, so let us take it first.

Decreasing cover starts at a chosen amount and reduces over the years, roughly in step with a repayment mortgage. The idea is that the cover falls as the debt does, and at the end both are gone. Premiums are generally lower than level cover for the same starting amount, because the insurer's exposure shrinks each year.

Level cover stays the same throughout. The amount you start with is the amount that pays out, whether the claim comes in year two or year twenty.

Which suits you depends on what the money is actually for.

If the only job is clearing a repayment mortgage, decreasing cover lines up with the debt neatly. If you also want something left over for the family after the mortgage is cleared, level cover does that and decreasing cover does not.

Two things to watch. Decreasing cover is built around a repayment mortgage, so it does not line up with an interest-only loan, where the balance stays put. And the rate at which the cover reduces is set when the policy starts, so if your mortgage rate changes substantially, the two can drift apart.

What "critical illness" actually means

It does not mean any illness, and this is where disappointment usually comes from. Nobody reads the definitions at the point of buying. Everybody reads them at the point of claiming.

Each insurer publishes a list of conditions it covers, with definitions attached, and a claim is paid where a diagnosis meets the definition. The lists are long and they are not identical between insurers. Some conditions are covered only at certain severities. Some policies pay a smaller amount for less severe conditions rather than the full sum.

So "which conditions, and how are they defined" is a far better question than "how much is it". Two policies at the same price can behave very differently at the point someone is ill, and comparing them properly is a large part of my job.

What happens after a claim

Worth being clear about, because it is the main trade-off with a combined policy.

If you claim on the critical illness part, the policy generally pays out and ends. There is no life cover left afterwards. For someone who has just had a serious diagnosis, that can be the moment they most want cover, and getting new cover after a diagnosis is harder and costs more, if it is available at all.

Two separate policies behave differently. A critical illness claim ends the critical illness policy, and the life policy carries on.

That is the real difference between the two routes, and it costs more. Whether it is worth it depends on your circumstances and your budget, which is a conversation rather than a web page.

How much, and for how long

The usual starting point with a mortgage is the amount outstanding and the number of years left to run. It is a sensible anchor, and it is often not the whole answer.

Worth thinking about as well:

• What else would need paying if the worst happened. Childcare, school costs, a car on finance.
• What income would stop, and what would carry on.
• What is already in place. Death in service from an employer is common, and it usually ends when the job does.
• Whether your partner's position differs from yours. A joint policy pays once, on the first claim. Two single policies can pay twice, and they stay with each person if circumstances change.

Two things people wish they had known

Writing a policy in trust. Dull name, genuinely useful thing. For many families it means the payout goes straight to the people it is meant for, usually faster, and it can sit outside the estate for inheritance tax. The right arrangement depends on your circumstances, and it is easier done at the start than later. Your solicitor or accountant should be part of that if your affairs are at all involved.

Cover and the mortgage are separate things. Your cover does not have to come from your lender, it does not have to start on the day you complete, and it does not have to end if you move. When you remortgage, your protection is worth reviewing at the same time, because the loan and the family situation have usually both changed.

Where this sits alongside other cover

This page is about a single policy covering both events. If you want them separately, or only one of them, there is life insurance and critical illness cover.

Both pay a lump sum. Neither replaces your monthly income if you are off work for a long period without a qualifying diagnosis, which is what income protection is for. Plenty of households end up with a lump-sum policy and an income policy doing different jobs.