Protection cover for mortgages frequently fails to offer critical illness cover with most clients only being encouraged to take out life cover by brokers. But in reality, periods of serious illness are much more likely than early death.
Roy McLoughlin, IFA and partner at Master Adviser, said, “My message out to mortgage brokers is to stop selling life cover only to clients – sell income protection with life or critical illness with life. The statistics tell us we are more likely to be ill than to die – and life assurance won’t help you pay the mortgage if you are off work.”
Clients who do have policies may find they are old and don’t reflect their current circumstances. Brokers are instead satisfied clients are in possession of a life policy without checking if it is adequate.
McLoughlin added: “What we should actually be doing is having a look at the policies they already have. Be very careful about cancelling any policy – as a rule of thumb don’t do it – but check out their level of cover and invariably it will be too low because they took it out 10 years ago. Keep that policy and take out a new one for the extra amount they need.”
Alan Lakey, director of CIExpert, said: “To get the mortgage they want many people have to extend the mortgage term to perhaps age 70, because the affordability calculations are such that someone who wanted a mortgage term of 15 years has to take one of 20-25 years.
“These people will often have some form of protection cover that expires five years earlier than the new mortgage term. Most companies allow, under the guaranteed insurability option, policyholders to increase the sum assured or extend the term of their policy.”
Lakey said in cases such as these brokers should check if the wording of the policy has changed.
“It could well be the case the quality of plans today is such that with care you can re-broke and give your clients a better deal and make money from doing so.”
