You know the drill. £300,000 repayment mortgage = £300,000 level or decreasing life cover. Job done. Mortgage protected. Move on.
And they are the lucky ones.
Many people taking a new mortgage these days won’t have protection raised at all.
You may be an adviser who sells a bit of life cover on a mortgage and thinks that’s OK, or more likely you’re an adviser who has picked up new clients where this has been done before they met you (and you’ve since arranged something much more suitable).
Either way, it is worth taking that extra bit of time to arrange proper financial protection, rather than thinking a £7 per month term assurance ticks all the boxes.
Life cover is cheap for a reason these days – a claim is a lot less likely to happen than the other insurable events such as serious illness or not being able to work. And even if that life cover pays out, what was the point paying off the mortgage if the client can’t then afford to live in the house?
Mortgage Adviser and founder of Masons Financial Planning, Dean Mason, agrees: “It's very easy in the excitement of moving to a new home to think that so long as your mortgage is paid should you die, you and your loved ones are OK. This is where the mortgage broker has, I believe, a duty of care to discuss the full consequences of losing an income or a breadwinner in any relationship.
“Monthly household bills still need to be paid and life needs to be lived for those still around or incapacitated. Using a comprehensive but relevant and bespoke budget planner is a vital part of the adviser role and whilst the additional premiums needs to be kept in mind, it is small fry compared to the implications of not being able to pay essential bills or provide food and wellbeing.”
Modern protection is not about windfalls or creating wealth. It’s about taking appropriate steps to ensure financial security whatever happens in the future.
The ongoing and positive development of partial payments and severity-based cover across the market for serious and critical illnesses means that for some conditions, such as early stage cancers, the full mortgage amount may not be paid off. But that’s a lot better than nothing being paid at all, which is where the market was at a decade ago.
More importantly, for about 25% more in terms of price, clients can choose to boost their cover with Vitality and receive full payments for all the key conditions – plus up to 200% of the original amount for other long-term illnesses.
Modern protection needs to be flexible and should adapt when life changes, including the potential for multiple pay-outs for different conditions or illnesses that return. It should also offer more than just insurance because today’s customers demand more. Many people want to be rewarded for being loyal and many more prefer to receive something tangible up front rather than just waiting for a cheque they hope they’ll never need.
Mr Mason added: “The Vitality range is particularly useful to the broker community, not just because of the additional conditions covered and wide range of partial payments on their serious illness cover, but because it puts a really positive spin on protection. Clients who don't want to face the reality of death or illness, and there are many, much prefer the prospect of being rewarded for being healthy via premium savings or treats in the rewards programme. It can help to open their eyes that they are getting something tangible for their money, as well as the insurance.”