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Mortgage and protection advisers should not really need further incentives from the lenders to encourage mortgage borrowers to take out protection. Likewise, I would question how appropriate it is for lenders to be offering better deals or more favourable rates to borrowers who are fully protected and were able to repay their mortgages in the event of death, critical illnesses, unemployment, or long-term sickness.
A great idea in theory and of course better for the lenders, as it will help reduce their repossessions, but the FCA and MCD policymakers are likely to frown at any type of incentive schemes.
One idea would be for lenders to insist on protection being in place before the mortgage offer was sent out. As this is unlikely to happen, what is the answer to this industry-wide problem of borrowers not taking out sufficient protection?
The clear answer is that offering borrowers advice on protection should be an integral part of every mortgage and protection adviser’s application process.
At Finance Planning we care enough about our clients to feel responsible for what happens to them after they move into their home. Our advisers understand the social and moral responsibility of ensuring our clients are protected if something unfortunate were to happen to them. Our advisers will discuss “it won’t happen to me” scenarios, and use real life examples such as the recent tram crash in Croydon to emphasise the point that these things do happen.
Good protection advisers will help their clients to understand the risks of not taking out sufficient protection and persuade their clients to protect themselves without the need for further incentives.
Terry McCutcheon is CEO of The Finance Planning Group