PROTECTION AND YOUR MORTGAGE CONVERSATIONS

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1 PROTECTION AND YOUR MORTGAGE CONVERSATIONS

2 CONVERSATION STARTERS This information is for UK financial adviser use only and should not be distributed to, or relied upon by, any other person. Mortgages and protection go hand in hand, but your clients won t always recognise this. Including protection in your conversations can be challenging, but there are a number of different approaches you can take. 2

3 Protection and your mortgage conversations Beyond the basic need to have cover in place should your client die to pay off any outstanding mortgage, there are many other aspects that they should consider. IT S NOT THEIR HOUSE, IT S THEIR HOME Your clients aren t really worried about what happens to their mortgage or house should they become ill or die; what is more important to them is what the impact will be on their family and home. Drawing out the underlying emotional need to protect their family home will resonate with them more. Once your clients understand what the insurable interest is, they often take out insurance in case something gets lost, stolen or damaged. There is generally a financial cost involved in replacing the item they are protecting. So what stops people taking out insurance on themselves? What they don t always see is the insurable interest and financial impact that serious illness or death can have. THERE S MORE THAN JUST THE MORTGAGE TO CONSIDER It s important to remind your clients that even if the mortgage is paid should they die, they may be leaving their family with a home that they can t afford to maintain. Having some extra cover will give them peace of mind, knowing that their family don t have to deal with financial worries if they were no longer here. A third of UK mortgage holders admit that if they or their partner were unable to work for six months or longer because of ill health or personal injury, they d be unable to live on a single income.* A critical illness cover policy can help ease their mind. HELP REMOVE FINANCIAL UNCERTAINTY AT DIFFICULT TIMES Survival rates are continuously improving, but suffering a critical illness can be costly. Macmillan Cancer Support research shows that four out of five people find themselves, on average, 570 worse off a month as a result of a cancer diagnosis.** Financial stability at difficult times can make a significant difference to your clients and their families. Taking away the pressure of having to continue to pay a mortgage and other bills if you become ill can make a big difference, so it s important that your clients consider this. Source: * Scottish Widows Protection Report, 2016 ** Macmillan Cancer Support,

4 Protection and your mortgage conversations STATE SUPPORT IS CHANGING People often don t know or overestimate the level of support they will get from the state. The main state benefit available to mortgage holders, Support for Mortgage Interest (SMI) has undergone some radical changes. With SMI the government pays the interest on a mortgage but not the capital (and only for the first 200,000 of an outstanding mortgage) and the waiting period to claim this benefit is now 39 weeks.* And from April 2018, the Government is changing SMI from a benefit to a loan. This means that a person claiming will have to pay back the amount loaned on their return to work or sale of the house. IT S IMPORTANT FOR YOUR CLIENTS TO REGULARLY REVIEW THEIR PROTECTION NEEDS Remember, if your client is remortgaging, this is an ideal opportunity to revisit the protection conversation. Many protection plans include guaranteed insurability options related to mortgage increases. There s no additional underwriting needed, so potentially an easier conversation for you to have. And when your clients receive an annual benefits statement, this can serve as a reminder to them of the cover they have in place, helping to trigger the conversation. SMI will also form part of Universal Credit and be subject to the no earnings rule. This means if there are other parties to the mortgage and a spouse/partner is still working and earning, no support will be available. Helping your clients understand that there is less support available than they may think from the state should something happen to them can help reinforce the need for protection. Source: *gov.uk,

5 Protection and your mortgage conversations HOW CAN SCOTTISH WIDOWS PROTECT HELP? With the range of covers and features we have available for your clients, we can help you provide the products to help meet your clients protection needs. Ensuring your clients have enough life cover to pay off their mortgage is just the start. MENU PLAN Scottish Widows Protect is a menu plan that gives you the flexibility to choose a number of covers for your clients, where appropriate, and adapt them as their protection needs change. If your client has only taken life cover in respect of a mortgage, they could be in danger of losing their house if they re unable to make the repayments because they become too ill to work and have no income. With a smaller amount of critical illness cover on a family income benefit basis, your client would have a replacement income while they re undergoing treatment that would allow them to continue repaying the mortgage. Or an additional life cover policy on a family income benefit basis can help leave your client s family with a monthly income until the end of the policy term to pay the bills, should they die. ADDITIONAL FEATURES With our multi benefit quote and split sum assured functionality you can set up more than one cover in one quote. Your clients should also consider indexation, so their cover can keep in line with inflation. And if they are buying a family home, our critical illness covers provide free children s cover at no extra cost. We also provide free mortgage cover for new mortgages, so your clients have peace of mind knowing they have some cover in place before their policy starts. This gives them cover from the date we receive their application and their direct debit instruction and they exchange contracts/conclude missives. And we offer a price lock promise where, from the date your client s application is submitted, the price won t change for up to 12 months. These benefits can help give your clients peace of mind should there be any delays in their mortgage exchange or completion. 3

6 Protection and your mortgage conversations FURTHER CONVERSATIONS We send an annual plan summary to your clients, which you will also receive a copy of, to remind them of the valuable cover they have in place. This is an excellent opportunity to carry out a review with your client to make sure the cover they have in place still meets their needs. Our protection policies are flexible and your clients can often adapt them during the term of their policy without having to cancel their existing cover first. Your clients also have guaranteed insurability options on their policy which allows them to increase their sum assured without further underwriting in certain circumstances, including if they have increased their mortgage. ADDITIONAL SUPPORT All our policies include our Scottish Widows Care service, which gives your clients more than just the financial protection they might need. Through our work with the independent nurse advisory service, RedArc, your clients and their families can get the practical advice and emotional support they might need during difficult and traumatic times in their lives. Their team of personal nurse advisers are all highly experienced, registered nurses with a wide range of specialised and general medical knowledge. They offer your clients a flexible service that can be customised to suit exact requirements to give the personalised support required. 4

7 FIND OUT MORE With further welfare reform on the way, financial uncertainty around Brexit and an increasing focus on financial resilience, there s never been a more important time to broach the financial protection conversation with mortgage clients. With the range of options we can offer, we can help you deliver the right solution for your clients mortgage protection needs. For more information on Scottish Widows Protect visit our dedicated adviser website or contact us by telephone or . scottishwidows.co.uk/extranet/ products/protection protectsales@scottishwidows.co.uk

8 Scottish Widows Limited. Registered in England and Wales No Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number /17