One of the key drivers behind the current boom in the protection market is the significant sea change that has affected the mortgage market in recent years - the move away from endowment mortgages to alternative product shapes.
This report estimates that a total of 22.5% of all mortgages in the UK, or 2,534,000 borrowers, are now protected by MPPI. This is a positive development – but also one which should prompt IFAs to think of the wider opportunities for growth.
Scottish Equitable Protect
While MPPI products are useful, by looking beyond the limitations of this product to a menu-based product designed for mortgage holders, IFAs are often able to provide a more tailored and long term solution for their clients.
The advantages of a fully-fledged mortgage menu product include greater flexibility, greater choice of types of protection and longer term protection. Although cost may be relevant for some, IFAs are well placed to educate clients that price should not be the key driver when looking at protecting family needs over the longer term.
Although the growth in protection for mortgage repayments is positive, Scottish Equitable Protect believes that this will in turn also lead to a resulting knock on effect in other areas of protection – such as income protection which enables people to ensure that their payments will be guaranteed even if their source of income ceases due to illness or long term absence. How many people have thought through the consequences of their major source of income stopping due to sickness or unemployment?
This type of development would affect not only their ability to meet their regular mortgage payments – but would impact on almost every aspect of their lives. As a result, an income protection policy, covering a greater proportion of their salary for a much greater time period, might be a better suggestion for many people – especially those with dependants or multiple financial commitments.
Today's "direct debit lifestyle" means that for many individuals the impact of loss of income would affect much more than just their mortgage payments. Recent research gathered by Scottish Equitable Protect suggests that the average monthly spend for a family of four is £2040.91. This includes £524.37 to run a typical family car, £94.33 on utilities, and £113.33 on credit card and personal loan repayments – all areas which could impact severely on family life if they were unable to make the payments. Best advice in many cases then would be to look beyond the mortgage and look to covering a greater part of an individual's income.
Today's menu-based protection products enable IFAs to provide flexible, tailor made solutions which suit the individual needs of their clients – and will grow with them over a number of years. Whether a opting for a mortgage-specific menu, or one which offers greater potential scope for protection, the menu based approach provides an ideal building block for IFAs to grow their business. A menu product enables the IFA and client to review their protection needs on a regular basis and make adjustments as required – and can act as a perfect catalyst to financial health checks.
IFAs who have not experienced the benefits of the menu approach should take a closer look.IFAonline
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation