A study from comparison site Compare The Market found that as many as three million mortgaged households do not have a life insurance policy in place, which Dan Hutson, head of life insurance at the site, described as “concerning”.
Should advice be compulsory?
Helen Pierson, head of business development at Mortgage Bureau, argued that with so many apparently cheap products being pushed by comparison sites, clients are easily attracted to them rather than taking out a quality product through their mortgage broker.
She called for advice to be made a compulsory requirement for the sale of all life policies, adding that the way life cover is promoted also needs to change.
She explained: “The way in which life insurance is often advertised on TV is always a family scenario and highlighting protecting partners, but never protecting their mortgage so that others aren’t left with their debt.”
Or should cover itself be compulsory?
Sam Bogdos, protection specialist at Bespoke Finance, went a step further and argued that it should be a mandatory requirement to have some kind of cover in place for illness and death if the mortgage is a joint one.
He added: “People see life insurance as an additional cost; a product that can’t be seen or touched is a difficult product for people to invest in.”
What more can brokers do?
Sebastian Riemann, financial consultant at Libra Financial Planning, said that some borrowers rule out taking cover as they do not believe anything will happen to them, though he added that advisers themselves – and a lack of knowledge – can also make things difficult.
He continued: “The differences in the contracts offered can be vast and confusing and contrasting criteria can be difficult to keep up to date with. So much so that many simply avoid discussing these with clients.”
However Aaron Strutt, product and communications manager at Trinity Financial, suggested that it is now easier to advise on life insurance than it used to be, as brokers have more tools and information at their fingertips.
He added: “There is also a lot of coverage in the media about illnesses so people are more open to take cover to protect themselves and their family in case they can’t work or something very unfortunate was to happen. Our advisers know it is important to provide clients with a full service so they are as financially protected as possible.”
Is there room for specialism?
Andrew Montlake, director of Coreco, said that the industry needs to come together to work out how to tackle this protection gap, as there are “some fundamental issues with the whole insurance market”.
He also suggested that protection specialists may be the answer.
Montlake said: “While there are many brokers who do a fantastic job in protecting their clients, there are challenges especially where many employers provide such cover or premiums seem to be loaded. We find that referring to a specialist who concentrates solely on protection has more success than advisers trying to deal with everything themselves, especially given the amount of work involved in a mortgage transaction these days.”