WHY MORTGAGE CLIENTS NEED INCOME PROTECTION WHY MORTGAGE CLIENTS - - PowerPoint PPT Presentation

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WHY MORTGAGE CLIENTS NEED INCOME PROTECTION WHY MORTGAGE CLIENTS - - PowerPoint PPT Presentation

May 17, 2023 213 likes •1.2k views

WHY MORTGAGE CLIENTS NEED INCOME PROTECTION WHY MORTGAGE CLIENTS NEED IP HOUSEKEEPING Questions can be submitted in the Ask a question box below the main webinar feed If you encounter any technical issues use the support option

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INCOME PROTECTION

WHY MORTGAGE CLIENTS NEED

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WHY MORTGAGE CLIENTS NEED IP HOUSEKEEPING

  • Questions can be submitted in the ‘Ask

a question’ box below the main webinar feed

  • If you encounter any technical issues

use the support option and then select ‘viewers’ and someone from BrightTALK will help you out

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  • State of the income protection nation
  • Positioning the protection need to mortgage clients
  • Pre sales underwriting
  • How much cover can my clients have?
  • Illustrating the income shortfall
  • Designing a protection solution for mortgage clients
  • Finding the budget for self employed clients

WHY MORTGAGE CLIENTS NEED IP AGENDA

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At the end of this webinar you should…

  • Understand the continuing need to mitigate the

problems caused by loss of income through sickness and incapacity

  • Be able to position talking points to highlight

protection risks to your mortgage clients

  • Describe the features and benefits contained within

an Income Protection solution

  • Be able to compile a multi benefit protection

recommendation to your mortgage clients, focusing

  • n different areas of protection risk

WHY MORTGAGE CLIENTS NEED IP LEARNING OBJECTIVES

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STATE OF THE

INCOME PROTECTION NATION

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STATE OF THE NATION BEING OFF WORK SICK

  • Its estimated that people in the UK take 137.3 million

days off work sick each year *

  • Often, this is for minor issues
  • Sometimes the sickness is more serious
  • Some people stay off work for long periods of time
  • Some people never return to work again

Source - https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductiv ity/articles/sicknessabsenceinthelabourmarket/2016

Minor Serious

  • ff work sick
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STATE OF THE NATION CLAIMANTS OF STATE BENEFITS

Data from the Department of Work and Pensions shows that between October 2013 and September 2018…

  • 4.3 million people started an Employment & Support

Allowance Work Capability Assessment

  • ESA is a state benefit which can be claimed if the claimant

is unable to work

  • Employed claimants cannot begin their claim for ESA until

their 28 weeks of statutory sick pay has ended

  • The claim form is 64 pages long

Source: Department of Work and Pensions - Work Capability Assessments, Mandatory Reconsiderations and Appeals - June 2019 https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourprodu ctivity/articles/sicknessabsenceinthelabourmarket/2016

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STATE OF THE NATION STATE BENEFITS

  • Another state benefit which

could be claimed by people with a mortgage is SMI – Support for Mortgage Interest

  • (SMI) is designed to help

people pay their mortgage payments should they lose their income

Source - Gov.uk/support-for-mortgage-interest/what- youll-get - Rates as at June 2019

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CLAIMING STATE BENEFITS SUPPORT FOR MORTGAGE INTEREST (SMI)

  • SMI provides benefit based on a

current interest rate of 2.61%

  • The maximum limit is for loans
  • f up to £200,000
  • The normal waiting period is 39

weeks

  • SMI benefit is paid as a loan

which means it needs to be repaid

  • Repayment of SMI also includes

interest when you sell or transfer ownership of your home

  • The current interest rate is 1.3%

and is subject to changes

  • SMI cannot help pay anything

towards insurance policies or missed mortgage payments (arrears)

  • To qualify for a Support for

Mortgage Interest (SMI) loan you usually need to be getting

  • ne of the following:
  • Income Support
  • Income-based Jobseeker’s

Allowance (JSA)

  • Income-related Employment

and Support Allowance (ESA)

  • Universal Credit
  • Pension Credit

Source - Gov.uk/support-for-mortgage-interest/what-youll-get - Rates as at June 2019

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STATE OF THE PROTECTION NATION SAVING FOR A RAINY DAY…

  • Having sufficient savings can be used to replace

lost income

  • However, according to a Money Advice Service

10.7 million adults in the UK have NO savings

  • This is 21% of the population
  • People who do save have an average savings

balance of £4,212.40

Source: Building the Financial Capability of UK Adults – 2018 – Money Advice Service https://masassets.blob.core.windows.net/cms/files/000/001/147/original/Adult_Fin ancial_Capability_-_Survey.pdf Source - https://www.independent.co.uk/news/uk/home-news/british-adults- savings-none-quarter-debt-cost-living-emergencies-survey-results-a8265111.html - March 2018

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STATE OF THE PROTECTION NATION BEING OFF WORK SICK

  • The average full time income in the UK in 2018 was

£29,588 *

  • Rounded up to an annual income of £30,000 this

equates to net take home pay of £1,995 per month

Source - https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earni ngsandworkinghours

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STATE OF THE PROTECTION NATION AVERAGE INCOMES AND OUTGOINGS

  • Lets say someone earning the UK’s average

annual income (£30,000 p.a.) with the average level of savings lost their income through sickness…

  • Let’s say their average monthly outgoings

were £1,500 each month Is income replacement through savings a viable solution?

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1500 1500 1212

  • 288
  • 1788
  • 3000
  • 2000
  • 1000

1000 2000 3000 4000 5000

Month 1 Month 2 Month 3 Month 4

STATE OF THE PROTECTION NATION REPLACING INCOME WITH SAVINGS

Reference: 4 month income loss analysis - assuming average income of £30,000 per annum and average savings of £4214. Monthly outgoings of £1,500

Savings Savings

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1500 1500 1212

  • 288
  • 1788
  • 3000
  • 2000
  • 1000

1000 2000 3000 4000 5000

Month 1 Month 2 Month 3 Month 4

STATE OF THE PROTECTION NATION REPLACING INCOME WITH SAVINGS

All savings are depleted in the 3rd month

  • f sickness

Savings Savings

Reference: 4 month income loss analysis - assuming average income of £30,000 per annum and average savings of £4214. Monthly outgoings of £1,500

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STATE OF THE PROTECTION NATION HOW LONG DO IP CLAIMANTS CLAIM?

  • Royal London’s claims

statistics 2019 reports that the average length

  • f time for Income

Protection claims is 9 years and 11 months

  • That’s the loss of 119

paydays

Source: Royal London Claims Statistics 2019 https://adviser.royallondon.com/globalassets/docs/protection/brp8p10004-our-claims-statistics.pdf

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Royal London’s State of the Protection Nation 2019 surveyed over 2000 people

ROYAL LONDON STATE OF THE PROTECTION NATION 2019

Source: Royal London State of the Protection Nation 2019 https://adviser.royallondon.com/globalassets/docs/protection/state-of-protection-nation.pdf

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Royal London’s State of the Protection Nation 2019 surveyed over 2000 people …said they would last less than 3 months on their savings and investments if they couldn’t work due to illness or injury.

18 – 35 years old Young singles / home sharers Private renters

56%

ROYAL LONDON STATE OF THE PROTECTION NATION 2019

Source: Royal London State of the Protection Nation 2019 https://adviser.royallondon.com/globalassets/docs/protection/state-of-protection-nation.pdf

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Royal London’s State of the Protection Nation 2019 surveyed over 2000 people …said they wouldn't last three months financially if they couldn’t work due to illness or injury.

Working Renters (with Private Landlords)

62%

ROYAL LONDON STATE OF THE PROTECTION NATION 2019

Source: Royal London State of the Protection Nation 2019 https://adviser.royallondon.com/globalassets/docs/protection/state-of-protection-nation.pdf

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Royal London’s State of the Protection Nation 2019 surveyed over 2000 people

  • Consumers believe they're almost twice as likely to

die during their working life than to have an accident that prevents them from working.

  • They also think that they are more likely to die than

to suffer a critical illness during their working lifetime

ROYAL LONDON STATE OF THE PROTECTION NATION 2019

Source: Royal London State of the Protection Nation 2019 https://adviser.royallondon.com/globalassets/docs/protection/state-of-protection-nation.pdf

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Royal London’s State of the Protection Nation 2019 surveyed over 2000 people

  • Almost a quarter of workers (22%) feel they could
  • nly survive financially for a month or less if their

income stopped.

ROYAL LONDON STATE OF THE PROTECTION NATION 2019

Source: Royal London State of the Protection Nation 2019 https://adviser.royallondon.com/globalassets/docs/protection/state-of-protection-nation.pdf

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ROYAL LONDON STATE OF THE PROTECTION NATION 2019

Source: Royal London State of the Protection Nation 2019 https://adviser.royallondon.com/globalassets/docs/protection/state-of-protection-nation.pdf

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INCOME PROTECTION TOTAL SALES BY VOLUME 2014 TO 2018

96,889 107,302 117,814 121,084 148,498

20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 2014 2015 2016 2017 2018

Source: Swiss Re Term & Health Watch 2019

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INCOME PROTECTION TOTAL SALES BY TYPE - 2018

Source: Swiss Re Term & Health Watch 2019

58% 10% 30% 2% Full benefit One year Two year Five year Other

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122,471 23,755 76 2,196

  • 20,000

40,000 60,000 80,000 100,000 120,000 140,000

Directly Authorised Tied Direct Bancassurance

Source: Swiss Re Term & Health Watch 2019

INCOME PROTECTION SALES BY DISTRIBUTION CHANNEL 2018

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POSITIONING THE PROTECTION NEED

TO MORTGAGE CLIENTS

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SETTING OUT YOUR STALL CLIENT EXPECTATIONS?

  • Business Card – 2 objectives?
  • Mortgage AND Protection

Adviser

  • Same level of importance?
  • Duty of Care
  • Normal Business Practice
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PUTTING PROTECTION ON THE AGENDA NORMAL BUSINESS PRACTICE

  • Let me explain my ‘Normal Business Practice’
  • This is how I work with my clients and this is what

my service looks like… I’ll source and recommend the most suitable and affordable mortgage for you and ‘My job is to make sure that should the worst happen, you and your family are able to keep your home and maintain your lifestyle…’

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REGULATORY RISK WARNING

Your home is at risk if you do not keep up repayments

  • n your mortgage…

What are the risks that could potentially stop you from keeping up your mortgage repayments?

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ILLUSTRATING PROTECTION RISKS & SHORTFALLS

Consumer perceptions are out of sync with reality?

  • Based on findings from Royal London’s State of

the Nation 2019; consumers think there they are more likely to die during their working lifetime than to go on sick leave for 3 months or more, or suffer a critical illness.

  • 22% of workers surveyed said they could only last

financially for a month or less if their income stopped

Source: Royal London State of the Protection Nation 2019 https://adviser.royallondon.com/globalassets/docs/protection/state-of-protection-nation.pdf

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What are the risks faced by a typical mortgage client?

  • John
  • aged 30
  • Smoker
  • 30 year Mortgage

The chance that any

  • f these things could

happen?

ILLUSTRATING PROTECTION RISKS & SHORTFALLS

Source: studio.royallondon.com

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ROYAL LONDON MARKETING STUDIO RISK REPORTS – I DON’T THINK I NEED IT?

What are the risks faced by a typical mortgage client?

  • John
  • aged 30
  • Smoker
  • 30 year Mortgage

Source: studio.royallondon.com

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ROYAL LONDON MARKETING STUDIO RISK REPORTS – I DON’T THINK I NEED IT?

Risk Risk Repo eport CI CI Repo eport

Source: studio.royallondon.com

IP R IP Repo eport

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PRE SALES

UNDERWRITING

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advise dviser.r .royallondon.com allondon.com

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25/07/2019

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HOW MUCH INCOME PROTECTION COVER

CAN MY CLIENT HAVE?

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25/07/2019

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ILLUSTRATING THE

INCOME SHORTFALL

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25/07/2019

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DESIGNING AN INCOME PROTECTION SOLUTION

MORTGAGE CLIENTS

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DESIGNING AN INCOME PROTECTION SOLUTION HOW MUCH IS JUST ENOUGH?

How much will Income Protection cost me?

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DESIGNING AN INCOME PROTECTION SOLUTION FACTORS TO INFLUENCE THE COST

  • Can the client get Income Protection?
  • How much can the client afford to pay?
  • What waiting period is needed?
  • How much income is needed? What’s

the maximum? How much would be enough?

  • How long should the plan run for?
  • How long should a claim be paid for?
  • Should the benefit increase over the

term?

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DESIGNING A MORTGAGE PROTECTION SOLUTION

ON A BUDGET

  • Bob 28 nb, Sue 30 nb
  • Both non smokers
  • Bob is the main income earner on £30,000

and employed full time

  • Sue works part time and earns £10,000 per annum
  • They have £10,000 in savings - but nothing else they could use to

replace their income in the event of sickness or incapacity during their working lifetime, other than state benefits.

  • They have a repayment mortgage which is £150,000 over 25

years

Case Study parameters – both clients class 1 occupations – Bob’s occupation Office Manager, Sue’s occupation Secretary

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  • Bob 28 nb, Sue 30 nb
  • Both non smokers
  • Bob is the main income earner on £30,000

and employed full time

  • Having seen the likelihood of claim, they want to include some

Income Protection, but are worried they won’t be able to afford the cover they need

  • Their budget is £30 per month

Case Study parameters – both clients class 1 occupations – Bob’s occupation Accountant, Sue’s occupation Secretary

DESIGNING A MORTGAGE PROTECTION SOLUTION

ON A BUDGET

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Joint Life Cover (Mort Rep Guarantee) decreasing 25 years £150,000

Total Cost: £8.03

£8.03

Source: Royal London Personal Protection Menu, June 2019 . Couple aged 28 male and 30 female next birthday, both non-smokers. Costs shown includes £2.60 plan charge for each cover.

Income Protection for Bob? Income Protection for Sue?

DESIGNING A MORTGAGE PROTECTION SOLUTION

ON A BUDGET

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INCOME PROTECTION

HOW MUCH COULD THEY HAVE?

Bob Sue Term Amount Level / Increasing Deferred Period Payment Period Monthly Premium

42 years (to age 70) £18,000 (max allowable) Indexed RPI 4 weeks Full Term 40 years (to age 70) £6,500 (max allowable) Indexed RPI 4 weeks Full Term

£54.75 £23.52

Source: Royal London Personal Protection Menu, Quotes produced June 2019 - Bob age 28 nb and Sue 30 nb, both non-smokers. Both class 1 occupations. Individual costs shown include £2.60 plan charge

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INCOME PROTECTION

IF YOU CAN’T DO ROLLS ROYCE…

Bob Sue Term Amount Level / Increasing Deferred Period Payment Period Monthly Premium

42 years (to age 70) £18,000 (max allowable) Indexed RPI 4 weeks Full Term 40 years (to age 70) £6,500 (max allowable) Indexed RPI 4 weeks Full Term

£54.75 £23.52

37 years (to age 65) £15,000 (£1,250 pm) 5 years 35 years (to age 65) £6,500 (max allowable) 5 years

£16.14 £9.96

4 weeks 4 weeks 13 weeks 13 weeks

Source: Royal London Personal Protection Menu, Quotes produced June 2019 - Bob age 28 nb and Sue 30 nb, both non-smokers. Both class 1 occupations. Individual costs shown include £2.60 plan charge and waiver of premium

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Joint Life Cover (Mort Rep Guarantee) decreasing 25 years £150,000

Total Cost: £8.03

£8.03

Source: Royal London Personal Protection Menu, June 2019 Couple aged 34 and 30 next birthday, both non-smokers. Costs shown includes £2.60 plan charge for each cover. Income Protection plans include waiver of premium

Income Protection for Bob? Income Protection for Sue? Bob Income Protection D13, £15,000 per annum 37 year term (to age 65) Indexed RPI Bob Income Protection D13, £6,500 per annum 37 year term (to age 65) Indexed RPI

£16.14 £9.96

Plan fee Plan fee Plan fee

Total Cost: £24.17 Total Cost: £34.13

DESIGNING A MORTGAGE PROTECTION SOLUTION

ON A BUDGET

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Total Cost: £29.56

Sue - Income Protection D13, £6,500 per annum 35 year term (to age 65) Indexed RPI – 5 year benefit Bob - Income Protection D13, £15,000 per annum 37 year term (to age 65) Indexed RPI – 5 year benefit

DESIGNING A MORTGAGE PROTECTION SOLUTION ON A BUDGET - IN A MENU

Joint Life Cover (Mort Rep Guarantee) decreasing 25 years £150,000

Source: Royal London Personal Protection Menu, June 2019 Couple aged 28 and 30 next birthday, both non-smokers. Both class 1 occupations. Plan fee

Bob Waiver of Premium D13 Sue Waiver of Premium D13

Royal London Protection Menu

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FINDING THE BUDGET

FOR SELF EMPLOYED CLIENTS

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25/07/2019

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Bob

  • b

45 45,000 ,000

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Bob

  • b

45 45,000 ,000

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Bob

  • b

45 45,000 ,000

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HOW ROYAL LONDON CAN HELP? INCOME PROTECTION

  • Own occupation on all cover
  • Fracture cover built into every plan

at no extra cost

  • Choice of 1 year, 2 year, 5 year or full

payment benefit terms

  • Indexed linked claims
  • Minimum Income Guarantee
  • Max cover £250,000
  • Helping Hand
  • Cover increase options (GIO’s)
  • and lots more…
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  • Understand the continuing need to mitigate the problems

caused by loss of income through sickness and incapacity

  • How to position talking points to highlight protection risks to

your mortgage clients

  • Describe the features and benefits contained within an

Income Protection solution

  • Be able to compile a multi benefit protection recommendation

to your mortgage clients, focusing on different areas of protection risk

WHY MORTGAGE CLIENTS NEED IP LEARNING OUTCOMES

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Ques Questions tions

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INCOME PROTECTION WEBINAR SERIES OUR NEXT WEBINAR?

  • The final part of our income protection

webinar series

  • “Discovering the technical features and

benefits of an income protection plan”

  • 28 August at 10am
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THANK

YOU

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London EC3V 0RL. Royal London Marketing Limited is authorised and regulated by the Financial Conduct Authority and introduces Royal London’s customers to other insurance companies. The firm is on the Financial Services Register, registration number 302391. Registered in England and Wales number 4414137. Registered office: 55 Gracechurch Street, London EC3V 0RL. June 2019 PRP8PN0159