Recent figures show that of the 11.1m mortgages arranged in the UK, around 3m households have no life insurance protection cover in place.
Clearly more needs to be done to highlight the importance of mortgage protection.
Unfortunately there is not a requirement to put protection cover in place to provide a safety net in case a person should die or suffer an illness, and are therefore unable to meet mortgage payments or cover any outstanding mortgage loan amount.
Worryingly, too many people are risking not having cover in place to help if their circumstances should change and their finances come under pressure.
So it is interesting that Vitality has launched a new mortgage protection plan, with all the covers that consumers buying a home might need, in one place – with a simple new process.
With all the paperwork required to buy a home and arrange a mortgage, the last thing on the ‘to do list’ is often sorting protection cover, as this means more paperwork.
So Vitality’s approach of offering life and serious illness cover to customers who answer just five underwriting questions is very welcome. Alongside this it also offers free mortgage cover, a benefit that advisers do not always talk through with their clients, so its inclusion should help spark conversations.
So far so good. However, the cost of the cover provided is not quite as simple as the application process.
Vitality’s Mortgage Plan includes the Optimiser option, so premiums are not fixed. Customers’ premiums may go up or down each year depending on how engaged they are with maintaining a healthy lifestyle. If they take part in a variety of activities then they could see a reduction in the cost of their cover, but if they do not, then the cost could increase.
Understanding customers’ financial position and budget is crucial, so they do not overstretch themselves and the protection premium is an amount that they are able to maintain over the long term.
If premiums increase to a point where they become unaffordable, valuable cover could be cancelled and lost. So when taking one of life’s biggest financial commitments, spending an extra 20 minutes on a call to obtain cover at a cheaper ongoing cost could be more attractive for customers.
Vitality’s simpler yet comprehensive approach to mortgage protection cover is welcome, but it may not be the overall solution to getting more people to put cover in place.
People need the security of knowing their mortgage is protected in the here and now, but also the future.
Emma Walker is chief marketing officer at LifeSearch