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Nearly a fifth would use critical illness cover to pay off mortgage – CIExpert

  • 09/02/2024
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Nearly a fifth would use critical illness cover to pay off mortgage – CIExpert
Some 19 per cent of people would use a critical illness cover (CIC) claim to pay off their mortgage if needed, according to a survey.

The CIExpert’s first Critical Thinking Report found that most consumers were recommended CIC during a mortgage-related conversation with an adviser, who typically suggested it could be used for this reason. 

Some 17 per cent of the survey’s 5,000 participants believed a CIC payout could only be used to cover a mortgage, and this belief was most prevalent among younger people, as 26 per cent of Gen Z felt this was the case, as did 27 per cent of millennials. 

Nearly a quarter – 24 per cent – held the view that policyholders needed to agree upfront what any payout would be used for. 

When asked why they did not have CIC, 41 per cent of respondents said it was too expensive. A further 26 per cent said they did not have a policy because they did not have a mortgage, while 14 per cent did not believe they would get a payout. 

Some 14 per cent said they did not understand the policy or its benefits, while eight per cent were counting on sick pay from their employer. More than a tenth – 11 per cent – felt their finances would be enough to cover any loss in income due to illness. 

Of those who did have CIC, a fifth got it because they had children and a further fifth said they had it as they were worried about getting ill. 

Some 18 per cent had a policy because it came with their insurance policy, while 18 per cent had a fear of getting cancer. 


Already stretched finances

The survey included 500 advisers, and of those, 85 per cent said clients rejected cover because they said it was too expensive.  

Nearly half 46 per cent said their finances were already stretched from buying a home, and 29 per cent said clients believed they did not need a policy as they had income protection. Some 47 per cent of advisers said clients did not think they would get seriously ill in the short term so would not need CIC.  

The majority of advisers 76 per cent said clients took out a CIC policy because of discussions during the remortgage or purchase advice process. 

There were misconceptions among consumers about getting CIC, as 49 per cent did not know if advisers charged for advice. When respondents were told that advisers did not always charge for advice, four in 10 said they were now more likely to go to an adviser in the future. 

The study also found that 85 per cent of consumers did not take advice for CIC, but 47 per cent would consider it. Younger people were more likely to seek advice, with this figure rising to 62 per cent of Gen Z and 57 per cent of millennials. 

Alan Lakey (pictured), director at CIExpert, said: “The insights in the report are thought-provoking, with some particularly surprising aspects that emphasise the scale of the challenges that we face as an industry. Yet should we choose to ‘grasp the nettle’, there are some tremendous opportunities for us to pursue that could evoke dramatic change. 

“For example, we have identified a mismatch between consumer motivations and what the industry communicates as the key benefits of having a CIC policy. Consumer needs are changing, particularly amongst younger generations who have a far higher proportion of renters and a greater focus on their health. As an industry, we have become heavily focused on aligning CIC with paying off the mortgage, but this study highlights that it isn’t the prime driver for consumers.” 

He added: “In the past 10 years, we have seen tremendous improvements in the quality of CIC products being developed, but we are clearly failing to communicate some of the new features that have evolved, such as additional payment conditions and added-value services. 

“With further product evolution, there is an opportunity to change the narrative and reposition the product to address a younger generation, whose fear of being able to rely on the state for their health now and in the future is a real and profound need.” 

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