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Ask the Experts: Is mortgage protection worthwhile?

by: Jennifer Gilchrist
  • 15/07/2013
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Ask the Experts: Is mortgage protection worthwhile?
Our Ask the Experts column is your chance to put industry figures on the spot. In this edition Jennifer Gilchrist, senior product development manager at Bright Grey and Scottish Provident, answers your question.

Q: Are increase options on a mortgage protection plan really worthwhile?

A: Moving house and securing a mortgage is an exciting yet stressful time. It’s also the first time that many clients will start to think about their protection needs. And for most that means considering their immediate situation when deciding on which protection product to take out.

But what happens when their circumstances change further down the line? Plans that are flexible enough to fit in with a person’s changing lifestyle are the ideal solution.

An area that is sometimes overlooked is the option to take out indexation cover instead of level cover for life and critical illness cover. In most cases, taking this out at the outset will not cost clients any more in premiums at the start, but will give them the option of increasing the sum assured yearly, so the cover doesn’t lose its value over time. If the increase is connected to inflation, the premium increase is likely to be fairly small. And clients may be in a much better position financially after a year to be able to afford a small increase in premium.

Most protection plans will allow for indexation cover to be added after a plan has started but further information and underwriting may be necessary. Therefore, the most hassle free and cost effective option for clients is to add this when the plans starts.

ask-the-expertsGuaranteed increase options are also a valuable feature providing increasing cover options and more lifestyle flexibility. For clients who are moving home or starting a family, for example, they provide an easy option to increase cover without having to provide more medical or other evidence, although terms and conditions will apply. This may be a cheaper solution than starting afresh with a new plan.

Having these options and flexibility is a valuable extra when selecting which protection product to take out. They ensure clients have a range of options should they want their cover to retain its value over time, or when more cover is needed as they get older and their lifestyle changes.

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