Brokers urged to consider consumer protection options

With confidence low despite the recent cut in interest rates, Lifesearch believed that the first consideration for the public should be to actually make a start and consider protection.

The firm claimed that people would rather put off making the decision and would often go for the first, and possibly most expensive protection option rather than shop around.

Borrowers were also advised to not buy mortgage payment protection insurance (MPPI) without considering income protection (IP). It said MPPI could be inferior and may cost more, as it would only pay out for one year and the premiums and conditions of the policy could be changed at short notice.

The firm also pointed out that some employers will offer IP so borrowers should not claim twice, or borrow more than can be paid. Lifesearch claimed that if people were unable to afford protection, questions should be asked as to whether they could afford the loan itself.

Matt Morris, LifeSearch policy adviser, said: “Many people consider mortgage protection, but they usually select a policy that will pay it when they can’t work. What they should be protecting is their income.”

Simon Burgess, managing director, British Insurance, said: “People need to take redundancy cover which comes as part of MPPI, and they are comparing two different products.

Peter Chadborn, IFA at CBK, said: “IP should always be considered ahead of MPPI because it can be more effectively tailored to individual needs and compliment any employers benefits. However, I would add that firstly, it is essential that arrangements put in place now are reviewed on a regular basis to ensure they remain appropriate and secondly, if you have any existing arrangements, ensure that your adviser has the ability to assess their merits and advise accordingly as opposed to just presenting a cheaper alternative.”

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