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Mike Farrell, Director of Protection Sales
According to UK Finance1 it’s anticipated that the re-mortgage market will grow to £69bn in 2022 before increasing again to £93bn in 2023.
This would mean that by 2023 re-mortgages would make up 30% of gross UK home lending activity compared to 20% in 20211. And UK Finance also estimate2 that around 50% of all remortgages involve additional lending, suggesting the client absolutely needs to review their protection requirements.
The protection gap
When considering this evolving mortgage market and taking into account all the other life changes our clients might have faced over the previous 2-5 years, it becomes clear that we need to start considering protection planning as an ongoing process. Advice needs to be updated and products potentially added to a portfolio that develops along with the client and their family.
So what are some of the potential changes in circumstance that you’d want to consider today as hooks for a protection conversation? Research we’ve carried out at LV=3 indicates that only 26% of mortgage holders have some form of protection. This leaves nearly three quarters (74%) without any form of protection. And only around 1 in 10 are covered by Income Protection or Critical Illness cover (actually only 7% have any Income Protection, and only 11% have Critical Illness cover).
Expanding families, or relationship break-ups?
It seems so obvious but if your client has had additional children since you last saw them, you have to bring up their changing protection needs. Their household costs may have gone up, and household income could have reduced. Their attitude to financial risk may have changed as a result; after all they’re responsible for someone else for at least the next 18 years!
I think it’s safe to say in the majority of cases that, no matter how well you’ve looked after them previously, a review will be in order.
Another trigger for the next stage of protection planning has to be separation or divorce, with over 103,000 UK couples getting divorced in 20204. Policies may need to be split, or new Family Income Benefit plans implemented to protect maintenance payments. Given the nature of divorce and the ongoing financial responsibilities that may be in place, it really is time for a grown-up conversation.
Tools and calculators help to reinforce the message
So as we can see reviewing a client’s protection at remortgage, or indeed at any other time clearly enables you to generate great client outcomes by building their financial resilience. You can help the client make informed choices and hopefully implement the plans that mean if something goes wrong in the future, the mortgage can be paid, the income can continue and the family is safeguarded.
Use tools like the LV= Risk Reality Calculator and the LV= Income Shortfall Calculator to help personalise the risk for them, and ultimately put them in a position where they can make informed decisions.
Don’t allow yourself or your client to use previous rationale to avoid the conversation. Budgets, attitudes, circumstances and products change and so should your advice.
When it comes to protecting income, LV= has been seen as a serious Income Protection player for many years with many awards over the past decade. We offer several products in the income protection space with the ability to flex cover in line with affordability, so LV= have a wide range of options to suit a variety of client needs and budgets.
In July 2021 we expanded the product range to include Mortgage and Rent Cover specially designed to cover mortgage or rent payments only and aimed at those on a lower budget or struggling to prove income/hours worked. We also introduced Executive Income Protection which is designed for small businesses (including those who own their own business) to be able to fund sick pay for their employees in the event that the employee can’t work due to illness or injury.
Our traditional Income Protection product, aimed at those in lower risk occupations, is one the most comprehensive in the market. It includes features such as parent and child cover, death benefit and can also be tailored for professionals like doctors, surgeons, dentists and teachers who have specific sick pay arrangements. We also offer our Personal Sick Pay product which is aimed at those in more risky occupations, which can sometimes be harder to insure with a more traditional IP product.
In addition all of these products plus our strengthened Life & Critical Illness cover, Life Protection and Family Income Benefit are available stand-alone or within our menu plan, the LV= Flexible Protection Plan. And don’t forget that all of our personal protection products give the policyholder and their spouse (providing they live at the same address) access to LV=Doctors Services.
How to find out more
We run regular LV= webinars on a variety of our products, sales skills and technical subjects, all of which you can register for in our Protection Webinar Calendar.
Meanwhile, visit the LV= Adviser Centre to find out more about the LV= Protection proposition. Alternatively, contact an LV= Account Manager to set up a personal briefing, or call us on 0800 032 4219.
1UK Finance 2021
2UK Finance 2019
3LV= Wealth & Wellbeing monitor – March 2022, 1045 mortgage holders.
4ONS Divorces, 2022