Scottish Provident has launched a new campaign to raise awareness of the need for comprehensive mortgage protection in the broker market.
According to the insurer, homeowners in the UK are dangerously underinsured and, as endowments with in-built protection continue to decline, the need for cover has heightened.
Roger Edwards, product marketing manager at Scottish Provident, said: “The Faculty and Institute of Actuaries report last year was another nail in the coffin for endowments, with flexible and standard repayment mortgages becoming more popular. For these sorts of loans we need a flexible approach to protection.”
As part of its campaign, the company is running a range of seminars for intermediaries on mortgage protection and has produced sales and consumer guides with education the key message.
It has been backed by research from MORI that confirms low levels of mortgage protection and poor understanding as to what is available. The survey says 39% of borrowers do not have any form of death cover, 74% do not have critical illness cover and 84% have no disability cover.
Those that have bought cover showed little evidence of shopping around for it, with 59% opting for the covers provided by the mortgage lender.
“People are just ticking boxes on the mortgage application form,” said Edwards. “But we know that if people shop around and speak to a broker the price can be cheaper or the cover wider.”
Edwards said the campaign aims to encourage borrowers to move towards more comprehensive cover that pays out on illness, disability and unemployment rather than simply on death.
A belief in the ‘Nanny State’ was also attributed as a reason for poor penetration levels. Some 43% thought the State would contribute towards mortgage repayments in the event of unemployment. But in reality, the State will only cover interest repayments after 39 weeks.
