For many, the convenience of dealing with one person who can arrange both their mortgage and life insurance is appealing. But often mortgage advisers can only consider life insurance policies from a handful of different life insurance companies. This will not only affect the price you pay but also the terms that are available to you. Not all insurance companies treat people in the same way. Your health, occupation and pastimes might mean your life insurance is better placed with certain insurers to which your mortgage adviser may not have access.
In this article, I'll show you what to look out for and when it would be better to speak with a specialist life insurance adviser*.
Why do mortgage advisers offer life insurance advice?
Mortgage advisers help customers who need a mortgage to purchase a property or who want to review their existing mortgage. Buying a house has been inextricably linked with buying life insurance. In many ways this makes sense, after all, people used to have to buy life insurance and assign it to their mortgage lenders so that their debt could be repaid if they died prematurely. This is no longer the case, except on very rare occasions. However, the financial burden on those left behind, should a mortgage borrower die, remains a concern which is why mortgage brokers will recommend life insurance as part of their service.
Do all mortgage advisers offer life insurance advice?
Not necessarily but many will. Generally, those mortgage advisers who offer life insurance will call themselves mortgage & protection advisers. 'Protection' is the industry name used for insurance relating to death and sickness. Mortgage advisers may also look at Buildings, Contents and Redundancy insurances.
Make sure you check the type of advice you are getting
You need to check whether a mortgage adviser is tied to one insurance company; a panel of insurance companies or whether they can access the whole market for life and sickness insurance. Below I explain the differences between each.
Tied to one insurance company
If your broker is tied to one insurance company then he/she has only one price and one set of terms to offer you when it comes to what you need. That price may be more expensive than one you would find on the open market.
When you apply for life insurance, you will disclose your past and present health as well as details of your occupation and pastimes. The insurance company that your broker uses might not be the most favourable for your specific answers. For example, one insurance company might increase the cost of your insurance because you're slightly overweight while another insurer on the open market wouldn't. No, one insurer is favourable for all possible scenarios that come up in an application. So, you might end up paying much more than you need to.
There are a variety of additional features with some insurance companies including access to virtual GPs, counselling, legal assistance and fitness rewards. You won't be able to compare what other insurance companies might offer you. Sometimes, insurance companies don't want to take certain risks, so they might exclude a claim in the event that you're participating in a sport that you participate in or the job that you do. This may not be the case if you applied to another insurance company but you're unlikely to know unless you check the rest of the market for yourself.
Verdict: Usually Expensive and Very Limited options
Access to a panel of insurance companies
If your broker accesses a panel of insurance companies, this is better than a situation where he/she is tied to only one. Generally, brokers who work with a panel of insurance companies try to ensure that they have a varied selection of companies to choose from. So, they may try to ensure that they have access to insurance companies that are favourable for a variety of health or occupational scenarios. They may also choose to include companies that are competitively priced as well as those that might cost a little more but offer additional benefits for their policyholders. This gives the broker more choice and in turn, you get access to more suitable options.
Verdict: Better Price and Expanded Options
Whole of market access
In this scenario, your adviser/broker will be able to access the entire market. This means that they have access to the most competitive rates as well as a wider variety of policies. Policies that might be more suited to you because of your health, your occupation or they offer features and benefits that you would like to engage with. A broker/adviser who can access all options on your behalf is much more likely to find you the most suitable option at the best price.
Verdict: Good Price & Options
How to check if you are getting the best advice
Whatever stage of the advice process you are at with your mortgage adviser, it's always worth double-checking any recommendation that they make. If you don't know how to get started, we would recommend speaking to a specialist life insurance adviser. It's free and we have vetted the services provided by a specialist life insurance advice company* which also provides up to £100 cashback to any Money to the Masses readers who decide to take out a policy.
Whether you use a specialist life insurance adviser or a mortgage adviser to provide a life insurance recommendation there are a number of personal details that any adviser should understand before they make a recommendation. Below is a list of some of the things a good adviser should be checking with you:
Dependents - knowing who will be impacted by your death or illness is vital. This includes children whom you pay maintenance to and even elderly relatives who may rely on you for care.
Debts - beyond the mortgage you are arranging, you should ensure a life insurance policy can pay off any other debts that will become a burden in the event of your death or illness.
Employer Benefits - if your employer provides a death-in-service benefit, it could reduce the life insurance you need to pay for. The amount and duration of your sick pay will help to work out if you need insurance to cover your bills if you become injured or ill and can't work.
Occupation - details of your work environment and tasks you have to complete can impact your life and sickness insurance application. Especially if these pose extra risks. Without understanding these upfront, your mortgage adviser won't be able to source the correct products or insurance companies for you and you could end up paying too much or compromising on the quality of your insurance.
Health - checking your past and present health as well as any family history of health conditions ensures that you apply to the right life insurance company. Not all of them make decisions in the same way and some will be more attractive for particular health conditions. A poor adviser or one who has limited options available to them will apply for your insurance without anticipating the impact your health will have on the cost and terms you are offered. So if you're completing lengthy forms before your adviser has asked you some basic health questions, they're probably wasting your time.
Existing insurances - life and sickness insurances generally become more expensive as you get older so an adviser who is doing a good job will be keen to ensure that you keep any existing insurances that are providing good value for money before they replace them. This may not always be possible but if your adviser hasn't even asked for your existing policy details then you've got to ask yourself whether they're even trying.
Wills & Estate - your adviser should ask about the details of your will to ensure that they can provide you with appropriate advice when arranging the Trust for your life insurance. This means ensuring that any claim is paid out quickly to the people you intend to benefit.
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