Mortgage industry must 'stop selling life cover only'

Protection cover for mortgages frequently fails to offer critical illness cover, with most clients only being encouraged to take out life cover by brokers. 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 have old policies which don't reflect their current circumstances, with brokers being satisfied at the 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 continued: "In some cases the wording of the policy will change. Check whether this will be the case and how it impacts on the cover. 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."

Les Schroeter, head of individual protection at Premier Choice added, "Intermediaries have so many opportunities to add value to clients when talking protection. But it's a question of drilling down and coming up with solutions the client hasn't thought of - even if sometimes you don't make a sale, you are getting the client thinking and realising that you are there to help.

"It is almost always better to have a wide range of products including income replacement if unable to work, cover against major illnesses such as cancer or heart attack, and cover for death, than to just have one large cover for one incidence such as death only".