Norwich Union is targeting borrowers who have repayment mortgages with its mortgage life insurance plan.
The plan is aimed at this area of the market for two reasons. Firstly because repayment mortgages do not have any life assurance built into them, and secondly because, according to the Council of Mortgage Lenders May 2001 survey of mortgage lenders, 68 per cent of all new mortgages are on a repayment basis.
Mortgage life insurance is a cafeteria-style mortgage protection plan, which has five options available. These include life cover, terminal illness benefit, critical illness cover, premium protection and mortgage payment protection.
The critical illness option covers a total of 28 critical illnesses that range from Alzheimers Disease to total permanent disability. It is available on a level or a decreasing term basis depending on the option chosen.
The mortgage payment protection element will pay out up to 50 per cent of gross monthly earnings to assist with repaying the mortgage. The premium protection option is a level benefit designed to pay for premiums in the event the person covered is unable to work because of illness or injury.
The terminal illness plan will pay a cash sum if the insured is diagnosed with an illness that will lead to death inside the next 12 months.
An additional feature of the plan is that it can adapt to changing personal circumstances. If a married couple take out the plan on a joint basis and then divorce, the plan can be split into two single life plans, this is unique to Norwich Union. In the event of a divorce other cafeteria-style plans taken out on a joint basis see the plan either cancelled or one person is removed from the cover.
The Norwich Union mortgage life insurance plan is similar to the mimi plan recently introduced by Liverpool Victoria. Mimi also offers a cafeteria-style series of options, including critical illness cover, life assurance, income protection and mortgage payment protection. Although mimis critical illness cover lists more illnesses at 31, it does not have a terminal illness option.