ProtectionJul 11 2013

Driving home the case for illness and life cover

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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.

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.

Advisers should be making the case to clients that having life insurance is as crucial as having car insurance, and probably more so. Clearly parents are not intentionally leaving their families unprotected but many will prioritise insuring tangible objects such as mobile phones over that of their families because of the perceived complexity of protection products and a lack of understanding. According to Macmillan Cancer Support half of people likely to be diagnosed with cancer in their lifetime by 2020 so it is vital that those who take out mortgages are protected from financial catastrophe if the main breadwinner becomes too ill to work.

With a little bit of advice more families could be protected from the financial shocks associated with ill health and prepared for whatever the future may bring. While logistically it can be easier to prioritise other products the bottom line is: it is morally and financially beneficial for all not to forget protection cover.

We as an industry, and advisers in particular, should be asking clients: ‘Can you really afford not to be protected?’ The answer is a resounding no.

Martin Noone is distribution director for Legal & General