Although well-engrained within the protection industry, the idea that buying property and securing protection go hand in hand isn’t unfortunately recognised by everyone.
Beyond simply being an available option or a ‘nice to have’, securing protection is a necessity for those embarking on a major financial investment which can leave themselves or their loved ones exposed should anything unexpected happen.
For those buying their first home, this is especially important. According to Coventry for Intermediaries, the first-time buyer (FTB) market is approaching a boom, expected to be worth £73.1bn by 2024, with FTB mortgages accounting for three in ten property transactions.
With most also spending a significant amount on additional costs, it’s clear that brokers play a vital role when it comes to advice and education on the whole housebuying journey.
This presents an unmissable business opportunity, and puts them in a great position to help ensure getting protection is high on the agenda.
Broker expertise
With many of those taking their first steps on to the property ladder unsure and unaware of what is involved when it comes to homeownership, the expertise of brokers cannot be overstated. FTBs currently spend on average close to £10,000 on extra costs associated with buying a home, including legal fees, moving fees, valuation fees, and surveying fees – all of which require the expert guidance of brokers to make sure they are financially prepared for the entire homebuying journey.
Within this suite of essential additional costs, brokers must make sure that protection takes a central role. After making one of the biggest purchases of their life, many FTBs will be left with very little to no savings, leaving no safety net if illness or an accident stopped them being able to cover their mortgage payments.
The fact is, even though some younger first-time buyers may not have a family, partner or dependent, there is still a huge risk in not having cover in place. Questions over how payments will be covered across a range of eventualities need to be considered, with mitigating factors put in place from the start.
Cover all bases
And mortgage brokers have a huge part to play in this. Advisers need to provide holistic advice to their clients, covering everything from the best mortgage rates to the life insurance options best suited to their circumstances. They must highlight the dangers of failing to choose the right protection or having no protection at all. It is easy for clients to fall through the cracks, but we need to change the conversation.
Such a rise in the number of first-time buyers should naturally be followed by a corresponding increase in life insurance policies being sought. It should go without saying that a review of life insurance should go hand in hand with any house purchase, but it’s also essential that mortgage brokers fulfil their responsibility by signposting FTBs to the right experts.
By connecting buyers with insurance professionals, brokers can ensure that clients are speaking to the right people able to offer the best possible advice. In turn, this helps them to develop rewarding relationships which have the potential to support the entire business.
By offering guidance to FTBs before, during and after the purchase of their home, brokers can really powerfully illustrate their value to new borrowers. Educating clients on the need to account for additional costs, and delivering a high-quality personalised service will create life-long relationships.
Empathetic advice
With that said, it’s important for brokers to understand who they are talking to. Naturally, immediately after the purchase of their first property most FTBs will already be stretched financially, and so additional expenses like protection don’t always seem viable or affordable.
However, life cover is at its most effective when taken out at the earliest opportunity, leaving policy holders paying less each month and facing fewer exemptions than they might face in older age.
It’s the expertise of the insurance expert that will be able to assure clients of the value of life insurance, but it’s the role of mortgage brokers to make sure the benefits are communicated clearly and early on in the process to maximise value – offering protection once the mortgage has gone through feels and sounds a bit like an afterthought which ultimately undermines its importance and does nothing to improve the broker client relationship.
Instead of presenting the ‘deluxe life insurance option’ which will admittedly leave FTBs fully covered given all eventualities, partnering with a specialist broker can offer more cost-effective options.
Offering something simple that covers the basics can be a gentle but worthy initial investment into protection. From then, clients and brokers can review potential options periodically and adjust the plan dependent on income, family and assets.
The burgeoning FTB market of the future is an exciting prospect for mortgage and protection experts alike, but it’s vital both parties are fully aware of the responsibilities and opportunities it will provide, in equal measure.
Phil Jeynes is director of corporate strategy at Reassured
