“Protection should not be treated as an optional add-on”
Protection should be treated as a core part of mortgage advice rather than an afterthought, according to one advice firm director.
“For many clients, taking out a mortgage is the largest financial commitment they will ever make,” said Paul McMath (pictured top), director at Prosper Home Loans. “Yet, protection is still too often treated as a secondary conversation, something to be mentioned after themortgage has been arranged rather than considered as part of the advice process. That needs to change.”
McMath argued that a mortgage represents a long-term commitment dependent on a client's ability to keep making payments, often over many years. Should a client die, become seriously ill or be unable to work due to illness or injury, the consequences can be significant for them and their family, he said.
He noted that protection conversations are often too brief, with advisers sometimes asking only whether a client wants life cover, critical illness cover or income protection without exploring the client's full circumstances, including dependants, income, employment position, existing cover, savings, sick pay arrangements, debts and wider financial responsibilities.
The FCA's Pure Protection Market Study interim report has identified a significant protection gap among UK homeowners, with a 2024 survey cited in the report showing more than 40% of mortgage holders lack life insurance. Separate research by LifeSearch and the HomeOwners Alliance found that over a third of mortgage holders had no life, critical illness or income protection cover, even as Vitality polling found that 56% of homeowners would not be able to keep up with mortgage payments for longer than six months if their income stopped.
McMath said Consumer Duty has brought greater scrutiny to this issue, as firms are required to consider foreseeable harm when recommending a large mortgage commitment. He said clients are entitled to make their own decisions on cover, but should do so with a clear understanding of the risks and options available.
“The key is not to frighten clients or pressure them,” McMath said. “The key is to help them understand the reality of the commitment they are entering into and what options exist to protect themselves and their families.”
McMath pointed to differences between client circumstances, such as first-time buyers focused on deposits and monthly payments, home movers stretching affordability, self-employed clients with limited sick pay, and families with young children, as reasons why protection conversations need to be personal and relevant.
He said such conversations should be clearly documented, covering what was recommended, why, what was declined, and what risks remain if a client chooses not to proceed. This, he added, protects both adviser and firm, and supports lenders by showing that the sustainability of the mortgage beyond completion was considered.
“Protection should not be treated as an optional add-on,” McMath reiterated. “It should be a core part of responsible mortgage advice.”
He said the market has focused heavily on rates, criteria and affordability, but that advice which stops there may overlook one of the biggest risks facing clients: their ability to maintain the mortgage in the future.
“The best firms will not treat protection as a sales opportunity,” he stressed. “They will treat it as a client outcome issue. They will have better conversations, better documentation and better systems for making sure clients are given the chance to make informed decisions.”
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