Latest government figures reveal more than 2,000 people have now put in offers on homes under the Help to Buy scheme, totaling more than £365 million of new mortgage lending.
Purchasing a new home – particularly your first – is certainly a cause for celebration. Yet while it is understandable to look forward to buying and furnishing your first home, many are not focusing on the importance of purchasing adequate insurance to protect their investment.
A Paymentshield survey revealed 34% have no contents insurance, 81% are without mortgage payment protection, and 96% have no income protection.
With thousands of new homeowners entering the market, financial advisers have a real opportunity to step in and show what value they can offer new mortgage clients – many of whom are living independently of parents for the first time – to ensure that they do not take unnecessary risks.
First time buyers may not appreciate the extent cover levels can vary between different insurance policies or may have an ‘it won’t happen to me’ mentality. The role of the adviser is to challenge these perceptions and ensure their clients understand the impact of things going awry if they don’t have the right policy in place.
The concept of Buildings and Contents insurance is often understood by the client but it is still important to highlight how the product may support their specific needs such as a 2 month deferred payment period to give them a little extra financial breathing room after they first move in and a 2 year introductory no claims discount.
However, protection for their mortgage or other outgoings is often less well understood and customers may be skeptical of its value.
It is therefore important to make your customer understand what their need for mortgage or income protection might be – for example exploring how long they could afford to continue to cover their mortgage and other outgoings if they lost their income. Would they be prepared to risk losing all the things they’ve worked so hard to pay for by not having adequate protection against the risk of accident, sickness or unemployment?
Less than half of the people surveyed by YouGov said they’d be able to cope financially for more than three months – is your customer in the same situation? Could they realistically afford to cover their essentials if they had to live on their savings or state benefits, which could amount to just £71.10 a week?
Our ‘Personal Finance MOT’ campaign and toolkit will help you encourage customers to see the benefit of reviewing their financial situation and talk through the fine print of insurance policies – for more information and to download the toolkit visit www.paymentshield-advisers.co.uk.
Tim Johnson is CEO of Paymentshield.