Every now and then we have conversations which inspire new ways of helping our customers. I shared one such moment last summer. A mortgage adviser told me the shift in the mortgage market from two to five-year fixed-rate deals had got them thinking about how they could engage with their clients on a more regular basis.
Sitting on the protection side of the table, my thoughts were slightly different: “If you can’t contact them about their mortgage needs so often, why not check if their protection is up to date instead?” And that was the catalyst behind our recent research – to find out what mortgage customers want in terms of protection advice and service.
We found there is a real need for protection-led conversations. Half (49%) of respondents had a change in personal circumstances since taking out their mortgages, but only 45% of them had updated their protection. That leaves a staggering 55% who experienced a change in circumstances but either did not update their protection or have no protection in the first place, which could make them more vulnerable to a financial shock.
So how can you, as a mortgage adviser, start a protection conversation?
- 20% of respondents had a new addition to their family, so it’s worth asking if they’ve got family cover as well as mortgage protection.
The average cost of raising a child from birth to 18 is £75,436 for a couple, rising to £102,627 for single parent families. New parents should therefore consider whether their level of cover protects their family as well as their home. It’s also a good moment to review their existing critical illness policy and check it covers children. The financial impact of a child’s critical illness can be huge – an average of £600 extra a month during active cancer treatment, for example – and it is the sixth most common cause of claims.
- 19% had a change in health condition, so it’s important to review their policy with them.
Is their condition eligible for a claim? Clients may forget they have cover in place or feel their condition is not serious enough to make a claim. In this case, you should check the support services provided by their insurer and signpost personal nurse advisers, second medical opinions, counselling services or health and wellbeing advice, which could help them. Finally, see if they can increase their cover, especially if they are eligible to use their guaranteed insurability options.
- 20% of respondents had a change of employment status, which opens a series of questions.
Have they had a pay rise recently? If so, check their provider’s increase options or quote for an additional policy to maintain their salary to protection ratio. Other clients may have had a reduction in household income due to part-time working through parenthood, eldercare, studying, lifestyle choice, or even redundancy. Does this make them more financially dependent on another member of the household? Have they changed jobs?
If so, how does their employer’s benefits package stack up against the one you reviewed when they applied for their mortgage? Should any of the following offered by their employer have changed, they may need to take out or increase their personal cover to plug the gaps:
- life cover or death in service pension
- income protection
- critical illness cover
For those clients who have gone self-employed or started contracting, it’s worth checking their existing protection policies are the most tax efficient for them. Should they consider business protection – or Group protection – if they’re working in a partnership or small business? With Group insurance available from just two lives, this can often be a cost-effective solution.
Regardless of the length of your clients’ mortgage deals, what’s clear is that regular communication is key. If opportunities for biennial mortgage reviews are reducing, you may like to contact them about their protection policies instead.
This story was first published in Mortgage Introducer on 11 February 2020
 Based on research among 1,003 UK adults with a mortgage who took out their product with an independent adviser. Conducted in October 2019.
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