Protection  

Driving home the case for illness and life cover

In recent times we have seen a welcome resurgence in the housing market. All data suggests that the market is increasing in confidence every day.

The latest monthly statistics from the Council of Mortgage Lenders revealed that lending had jumped 21 per cent in May, the sharpest rise since October 2008. Consequently the opportunity to improve business volumes is there for all to see and it is natural that advisers are increasingly turning their attention to converting these opportunities. Of course any uptick in business is welcome given the current climate, but many advisers seem to be missing out on another potential revenue stream.

Data shows that only half of UK mortgage borrowers have the means to pay off their mortgage debt if a financial catastrophe, such as death or critical illness, were to occur. Clearly many of these people have not asked themselves the question of what happens to their home if the worst were to happen. It is vital that anyone with significant financial commitments takes steps to protect himself before he finds himself in a situation where he is unable to meet his obligations.

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There is a question for advisers to answer here. As experts in the trials, tribulations, perils and potential pitfalls of financial services, why is this number not higher? At the point of taking out a mortgage it is traditional that clients are made aware of the need for protection. It is at the point of making what is probably the largest financial commitment of their lives that people are most receptive and therefore when most cover is purchased. The adviser community needs to continue to play a prominent part in this. It is a moral imperative that when we as an industry help these borrowers find the right mortgage we also help them to consider the correct protection policy. Offering the two in tandem is by far the best way to ensure we are meeting the client’s needs and safeguarding his future appropriately.

This does not mean being alarmist but sitting down with clients and objectively making them aware of the risks they are taking by not having CI or life insurance in place. It is our job as an industry to run through the different options available and ensure people understand the importance of reviewing their policies periodically to make sure they still have the right protection in place before they leave our offices.

For those reluctant to commit, reviewing direct debit lists is a simple, easy way to find that an extra few pounds each month for the value of life or CI. Often downgrading entertainment packages or changing shopping habits can allow easily for £100,000 of life cover and it is much cheaper than people think. If a lump-sum product is not deemed appropriate there are other options that clients need to be pointed towards if circumstances dictate. Products are available specifically to provide income in the event of death or CI instead of a lump-sum. The regular payments can help continue to fund lifestyle needs and in many cases this family income benefit is seen as more valuable than a simple lump-sum payment.