Some protection is better than none

Research recently published by LifeSearch provides an insight into the contemporary protection industry.

Its LifeSearch protection research 2008 is the result of interviews with 29 life offices, reinsurers and independent consultants, as well as the firm’s brokers.

Despite house prices levelling off, most mortgages still require higher income multiples than we would have dreamed of a generation ago.

Unsurprisingly, 94% of brokers said that taking out new mortgages was the most important trigger for clients buying protection insurance.

About 10 years ago, on average consumers needed £86,835 of life insurance to cover their mortgages. Now the figure is £221,758, according to the Council of Mortgage Lenders. In many cases this means higher premiums.

Buyers are stretching themselves to meet their mortgage repayments so monthly protection premiums may be unaffordable.

Part of the solution might be accepting that some protection is better than none.

For example, if buyers can’t afford to cover their whole mortgage, they could work out what they can afford and see how much cover they can get.

If the worst should happen, their partners would be in a stronger position by having part of their mortgage paid off rather than none.

Age is another factor. First-time buyers might be unable to afford protection but because they are younger and generally healthier they’re likely to be offered lower premiums.

Paradoxically, older buyers might have more disposable income but because of their age the cover is likely to cost more.

So the solution might be for brokers to recommend protection products with guaranteed options. Borrowers could take out a small amount of protection when they are young with a view to increasing it later on.

Guaranteed options allow many customers to increase their cover over time.

With half of those questioned by LifeSearch believing that the price of life cover will finally flatten out this year rather than continuing to fall, now’s a good time for brokers to look at smarter ways of helping their clients get the appropriate protection.