Nearly half of all mortgages purchased from the First National Building Society so far in 1997 are now covered by a serious illness policy, which pays off the mortgage if the policyholder suffers a serious illness (or death) during the term of the loan. This compares with just 36 per cent of loans covered last year, says First National. Other lenders are also reporting a high take-up in these policies.

The attraction of a serious illness mortgage protection policy, arranged either on the full or decreasing value of the loan, is understandable: a lump sum, taxfree cash payment is made at a time when you need it most - when you have suffered or been diagnosed with a life threatening illness that may result in you being out of work for months, or permanently. First National's recent survey also showed that an increasing number of couples are opting for joint policies.

Financial advisers warn however against taking out protection policies - whether life cover only or a combination serious illness/life policy on the decreasing balance of a mortgage on the grounds that you may find it virtually impossible to get another life insurance policy after suffering a serious illness. A decreasing value contract, paid out in the latter years of a mortgage loan may only pay out a few thousand pounds; for a relatively small extra premium, you can insure your life against a serious illness or death for the original amount of the loan, a sum that will be paid off at any time during the course of your mortgage loan.