WHAT KIND OF CLIENT CONVERSATIONS ARE YOU HAVING?

Mortgage Conversations

Mortgages and protection go hand in hand. The mortgage helps your clients buy their dream home while protection helps them to hang on to it if the worst happens. But it can be hard to put the right emphasis on the need. Whatever your approach, here are some tips and suggestions that might help.

GET MORE VOLUME

Make protection the cornerstone for the affordability conversation - introduce it early on in the meeting as a way to help your clients get the mortgage they need. Lenders are more confident with clients who have a repayment method in the event of death or critical illness.

GET MORE VALUE

Consider a policy on a decreasing basis in line with a repayment mortgage but build a menu plan that can also include a small amount of life with critical illness cover on an income basis to support it.

BUILD LIFETIME ENGAGEMENT

Use an annual review to make sure the loan still meets your clients' needs. If there has been a change in their life since they took out the mortgage, they may need to increase the loan amount, and with it, their protection.

CASE STUDY

Ben and Anna are buying their first home together after years of renting. Going through the affordability interview, you know what their plans are for the next five years: a new job for Ben, hopefully children are on the horizon too. Now's the ideal time to talk about the fact that it's not the things we're aware of that cause the biggest problems, it's unexpected life events that bring the emotional and financial pressure.

THE NEED FOR PROTECTION

Ben and Anna want a mortgage but have no protection in place. Their need is protecting their mortgage, bills and debts.

AgeBen 35, Anna 33
Mortgage£200,000 over 25 years on a repayment basis
Repayment£1,000 a month
Other Outgoings£900 a month
Salary£45,000, £37,000
£1,900
Monthly outgoings
 
£82K
Combined salary for Ben and Anna

HOW CAN A MENU PLAN HELP?

Joint Life with Critical Illness Cover (decreasing in line with their mortgage)

Written on a decreasing basis to cover their £200,000 mortgage for 25 years so that the mortgage is paid in full if either Ben or Anna gets a critical illness or dies. There would just be one payout for whichever event happened first (but they could choose a replacement cover option to continue cover for the remaining person). They've taken enough cover to be able to pay off the mortgage if they have to make a claim. The amount will go down each year in line with what they have left to pay on their mortgage. And if your client's mortgage interest rate changes or they decide to increase or extend their mortgage, there is an opportunity for you to review their protection needs.

Life with Critical Illness Cover (on an increasing basis)

Written on a single life increasing basis of £20,000 with a term of 30 years for Ben and 32 years for Anna so that cover ends just before they retire (age 65). The lump sum would go up in line with inflation too. This smaller amount would give them an additional sum to use for paying bills, or any additional expenses that arise from treatment.

Premium Protection

Premium Protection for a maximum of 32 years, with individual policies for each cover.

Whole of Life Cover

You could also consider Whole of Life Cover to help Ben and Anna manage potential inheritance tax liabilities in later life.

Conversation Tips

  • If your clients think they only need life cover in relation to their mortgage, remind them they could be leaving their family with a home they can’t afford to live in if they die.

  • Consider an additional life cover policy on a family income benefit basis and leave your client's family with money to pay the bills.

  • If your client has only taken life cover in respect of a mortgage, they could be in danger of losing their house if they're unable to make the repayments because they become too ill to work and have no income.

  • With a smaller amount of critical illness cover on a family income benefit basis, your client would have a replacement income while they’re undergoing treatment that would allow them to continue repaying the mortgage.

  • Most protection providers’ policies include guaranteed insurability options related to mortgage increases – with no additional underwriting. Talk to your client about when’s the right time to use it.

  • Consider indexation. It keeps your client’s cover in line with inflation.

  • Talk to your client about ‘keeping things normal’ for their children in the event of a critical illness or death of a parent. Cover on an income basis could help maintain a sense of stability if the worst happens.

  • If your clients are buying a family home, talk to them about protection policies that include free children’s cover.

  • A remortgage gives you added opportunities to review protection needs.

  • Remember the replacement cover option for joint life policies.

WHAT NEXT ?

Personal Protection

Learn about our personal protection products on our adviser extranet

For a snapshot of the cost of combining cover

Read some conversation tips for your mortgage clients

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