In Our Market
Industry news, research and expert opinion
Written by Tom Robinson, National Account Manager, Scottish Widows.
Scottish Widows Protect – Protection with Mortgage Clients in Mind
Advisers have an unprecedented opportunity to discuss protection needs with clients, as we all reflect on what’s really important. The global pandemic has led many of us to reassess our priorities and our finances.
LBG research found that two in five people (37%) have experienced a loss of income since March 2020, having faced furloughed hours, time off work for caring duties or a period of illness.
And in the same research nearly half of all respondents (52%) now say that in the event of the main earner in their household falling critically ill, they wouldn’t be able to stretch their savings beyond six months.*
For advisers it gives a unique opportunity to have frank and powerful conversations with clients about protection. They currently have a strong incentive to put cover in place and ensure their families are protected.
There are still plenty of borrowers who are concerned about their protection needs and are not in financial difficulty and Mortgage Advisers are perfectly positioned to review both their mortgage and their protection.
It is important for the adviser to be able to relate how a modern Protection policy can support the client, throughout the lifespan of the 25 or 30 year mortgage term. Consider the events that are likely to occur to families and individuals during the mortgage term:
Positive: New home, new job, new relationship, growing a family – supported by the flexibility and features of the product.
Negative: Job loss, break up/divorce, illness, bereavement -supported by financial claim and wellbeing benefits.
As part of Lloyds Banking Group, Scottish Widows have had plenty of opportunity to consider how we meet the protection needs of Mortgage clients through our proposition and these are outlined below:
Mortgage Free Cover
When a client exchanges contracts on a house they are legally required to purchase that house regardless of whether they die or suffer a critical illness. However most clients don’t want their protection policy to start until they start paying their mortgage. This potentially could leave them exposed. Mortgage free cover gives them free cover and peace of mind should anything happen during this window between exchanging contracts and moving in.
Free Mortgage Cover is designed to protect your client during the period from finalising their contract to buying their new home, to the start date of the mortgage. It’s available to customers who apply for life, life and critical illness, or a critical illness policy in connection with a new mortgage, subject to eligibility.
Your client will be covered for up to a maximum of 90 days from when they exchange contracts (or in Scotland complete missives).
We’ll pay out the initial amount applied for, up to a maximum of £1,000,000 for a life cover claim and £500,000 for a critical illness cover claim.
Price Lock Promise
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, subject to underwriting.
When an application is submitted through Scottish Widows, we guarantee the price for up to a period of 12 months if no change to your client’s health. This means:
- Reassurance that the price will not change before it goes on risk due to the client reaching a birthday milestone
- Peace of mind that you don’t need to keep going back to your client to say the premium has changed – especially if your client doesn’t need the policy to commence immediately (for example mortgage cover)
- No requirement to rewrite your advice recommendations every time your client reaches a birthday milestone.
Buyback Options: Life with Critical Illness Cover policies.
When a successful claim for critical illness cover is made, the policy would normally end. However, would the critical illness benefit be used to repay the mortgage or more likely support them during the traumatic period through diagnosis?
But what if they still want the security of having some life cover in place?
Life cover buyback is an optional benefit available at an additional cost. In the event of a valid CI claim this benefit allows a ‘Life with critical illness’ policy to provide a death benefit under the plan without the need for further underwriting.
Guaranteed Insurability Options
The benefits of GIO’s means that the clients don’t need to go through further underwriting. Therefore potentially avoiding the need to cancel policy in two years when the client moves house or has more children? GIO’s allow flexibility to adapt the plan when the clients lifestyle changes.
Guaranteed Insurability Options allows the sum assured to be increased in certain defined events without further underwriting, providing the original policy was on standard rates:
- Increase to a mortgage
- Marriage or registering of a civil partnership
- Divorce or dissolution of a civil partnership
- Birth or the adoption of a child, or becoming a legal guardian for a child
- Receiving a salary increase
- Replacement Cover – available at no extra cost with joint life (& CI) applications. This means that if a successful claim is made, this option allows the other life assured to take out a new policy for the remaining term of their original policy without the need for underwriting.
- This allows cover to continue for any future mortgage borrowing or family protection.
Childrens Critical Illness & Life Cover
Automatically included with all critical illness applications and therefore covers future needs if not relevant now. Includes flexible definitions of a ‘child’ to account for evolving families.
Cover grows as family expands so no need to notify of new additions to the family.
Access to Insurance
During the application process a real focus for Scottish Widows is to actively seek ways to ensure clients get the cover they need, as quickly as possible:
- 100% - For all asthma, back disorders and BMI cases, we will never request a GP report or ask your client to attend a medical examination
- 95% - of clients who tell us about a mental illness are offered cover, with 80% accepted on standard terms
- 90 days - is the number of days for which terms are guaranteed
- 91% - of clients are offered cover after manual underwriting
- 10% - Less than 1 in every 10 applications need a GP report meaning many of your clients can get terms agreed and their policy on risk without delay.
Source: Scottish Widows Data
Scottish Widows Care
Provided by Red Arc. An insurance pay out can really help to ease the financial burden at a time of family bereavement or critical illness diagnosis but you and your family might need more than just financial support.
That’s why with Scottish Widows Protect you have access to our Scottish Widows Care service, from the day your policy starts.
RedArc provides a support service that gives clients and their immediate family practical advice and emotional support to get them through difficult times. The service is available from the day the policy starts and the client does not need to be making a claim to access it. They will have access to a Personal Nurse Adviser who will support with second medical opinions, help at home, therapies and more.