The Exeter is urging to advisers to start prioritising conversations about income protection (IP) with clients due to rising mortgage repayments and the ongoing cost of living crisis.
The insurer highlighted data from the latest LMS Monthly Remortgage Snapshot which showed 46% of borrowers remortgaging were taking on larger loans, increasing their mortgage repayments by an average of £224 a month.
It argues while many of these clients will take out mortgage protection insurance, advisers need to consider the broader benefits of income protection as a more comprehensive safety net if illness or injury prevented a client from working.
The provider also referred to a report by Yorkshire Building Society from last month which showed 39% of people had already dipped into their savings to cover monthly living costs and 35% thought they would have to do so during the coming year.
With The Exeter’s 2021 claims data showing that the average claim duration was 101 weeks, the provider says savings alone are “simply not enough” to cover outgoings if someone is unable to work.
Furthermore, the average age of a UK first-time buyer was 32, according to Halifax data from last year, while the average age of an income protection claimant at The Exeter was 37.
The insurer said this meant that the point where an average first-time buyer remortgages from a five-year fixed rate product is also the age they are likely to find themselves unable to work, struggling not only with mortgage repayments but wider bills and a rising cost of living too.
At present, 75% of the mortgage market is on fixed rate mortgages, amounting to 6.75 million borrowers.
Consequently, as mortgage terms end and borrowers try to lock into a new rate for a high-inflation and higher interest environment, the Exeter is calling on advisers to ensure they are not only discussing the benefits of mortgage protection with clients but income protection too.
Jamie Page, head of strategic partnerships at The Exeter, said: “As people currently remortgaging are often taking on higher costs to free up equity, it’s important that advisers discuss wider protection options with their clients.
“Mortgage protection has value, but its coverage can only stretch so far. Amid the rising cost of living, clients need a comprehensive safety net should they lose their most important asset – their income.
“Our figures show the average claim duration for a full term income protection policy – 101 weeks – means clients can expect a prolonged period where their income could be impacted due to illness or injury.
“During this time making up a shortfall in income can be challenging and well beyond the scope of many people’s savings. Advisers must therefore discuss the expanded benefits of income protection to help maintain their clients’ financial security.”
