However, the pandemic has highlighted that it has never been more important to have this conversation.
It’s possible that the no-win, no-fee legal claims industry may jump on this bandwagon. This raises the potential for a broker to be pursued for compensation based on lack of advice given — if they cannot prove that they had at least one conversation about protection.
If brokers do mention protection, it is usually life assurance. If they sell a policy then typically it matches the value of the mortgage and costs the client about £20 a month.
It is often better to advise wider cover. Like most things, the cheapest is frequently not the best.
But if you’re a busy mortgage broker, do you have the time or the experience to look at all the conditions associated with every policy? Can you then explain to a client why a policy that costs perhaps £5 or £10 more each month than the cheapest one is far better for them and the reasons why?
During the lifetime of the mortgage less than two per cent of people will die. But about 40 per cent will have a serious illness with financial consequences.
Therefore, critical illness and income protection should be an easier sell. Especially as most younger people are typically more concerned with what happens if they get ill or suffer a serious injury, than if they die — which they rightly consider unlikely.
This can involve a challenging conversation as you have to bring clients face-to-face with the prospect that they may get seriously ill. Done right, however, and they will be grateful that you have made them aware of how they can be protected.
The other challenge for brokers is keeping on top of all the different products that are available. In the same way that mortgage products change all the time so do protection products, with conditions, illnesses and definitions added or subtracted on an almost daily basis.
Larger case sizes
If brokers don’t want this sort of conversation though, or don’t have the time to do it properly, they don’t have to.
Far better to pass it to a specialist protection adviser who can have the difficult conversations. Forming a partnership with such an adviser, the mortgage broker will still get paid.
For a critical illness cover with a premium of £110 per month, a mortgage broker will typically earn £700.
With a protection specialist, average case sizes are generally larger because the protection adviser invests considerable time talking about the different protection products available. Sharing expertise with a client usually results in the client being driven by the value of what they need, which is key.
It’s imperative the client has the cover they need and are driven by the value of cover and not its cost.
This can only happen if the client truly understands what benefits the cover will afford them and why.
The pandemic has highlighted the need for good quality protection – particularly critical illness and income protection which are the policies that younger clients are most likely to call on.
Supporting a client to take on the biggest debt of their lives and not providing them with proper protection advice, particularly at a time of pandemic, just might become the next claims scandal.
Far better, for the client’s sake and for yours, that they are provided with thorough advice so they are prepared for all eventualities.
Also, this will mean you’re not at risk of receiving that phone call asking why the advice wasn’t provided. Better still, you get paid for making sure they receive it.