The role of protection in the mortgage market

Mark Jones is head of protection at LV=

The mortgage market continues to make its recovery with the Bank of England recently revealing that mortgage approvals in January rose to their highest level in six years. 

This is likely to galvanise the protection industry as buying a house has historically been a major trigger for the purchasing of protection products. 

However this does not necessarily mean that people are protecting the most relevant aspect of their life.

Industry figures show that life cover sales surpass those of income protection and critical illness. This is no surprise given that these products are regularly purchased in conjunction with another financial product such as a mortgage. 

When taking on a huge financial commitment it makes sense that protecting your family against the worst is at the forefront of your mind.

However, statistically a client is more likely to suffer an illness which prevents them from working for two months or more than to die before they retire.

Indeed, our risk reality calculator shows that, a 30 year old non-smoking male would have four times the risk of being off work for two months or more, or twice the risk of suffering a serious illness compared to the risk of dying before 65 years.  

Although no one wants to think about getting ill, it remains a reality that nobody is invincible and some people will need to take time off work for long periods of time.  

Not enough of us have a back- up plan as to what we would do if we were unable to work yet we readily accept that our a car, a washing machine or even a phone might breakdown at some point and take out the relevant insurance.

We know from adviser feedback that one of the main problems they encounter is that clients often feel that protection isn’t relevant to them if they aren’t married, don’t have a family or own a home. 

However even if clients don’t have any of these things it is their salary that enables them to afford their lifestyle and hence income protection should be the cornerstone of their financial plans. 

It is no bad thing that strong connections exist between house purchases and protection sales as purchasing insurance of any kind removes an element of risk.  

However, given that the majority of clients would struggle to support themselves and their family if they lost their income as a result of sickness or an accident, it is crucial that advisers make them aware of the value of these protection policies.