Today, we are very lucky to be joined by Rachel Allison, our Head of Protection at Create Finance. She does a fantastic job looking at mortgage debt protection and other protection cover for all of our clients.
We have a great article coming up today, where Rachel will highlight the importance of having protection cover alongside your mortgage. So, let’s get into the article.
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Rachel’s Role at Create Finance
So Rachel, for our audience, please, the audience, what you do at Create Finance, a bit about your experience as well, please.
Rachel’s Experience
Yes, so I work alongside the mortgage advisors to help their clients, to make sure that everybody’s got the correct protection in place, that not that they necessarily should have, because some people feel that they should have different things in place, but just to make sure that they’re aware of the different options that are available to them, how the protection works, and how will that basically future proof them in regards to going forward with their new mortgage.
Um, it’s a job that I’ve been been doing for over eight years now, very passionate about protection, and making sure that clients are aware of protection, and just kind of helping people with their knowledge of it really as well.
The Importance of Protection
Fantastic, and would it be fair to say that your mortgage would be possibly the biggest debt that you ever take, that every client should have, or every borrower should, I say, should have the right advice around protection.
Rachel’s Answer
Definitely, even if, you know, you will get people that don’t want it, but they still should have advice against protection as to why they should have it, protecting that debt, protecting themselves, and their families going forward.
Rachel’s Passion for Protection
Rachel, I know you very well, and I know that you’re very, very passionate around protection. What makes you so passionate about protection?
Rachel’s Response
You know, it’s, it’s my job. It’s something that I love doing. I don’t see myself as a salesperson when it comes to protection. I’m an adviser; I’m here to advise people. And I think when you’ve been in situations where maybe you’ve had family members or friends that have become unwell or been affected by serious illness, it kind of hits home more, and it makes it more real, and it makes you even more passionate about making sure that other people have, have got that in place as well.
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What Does Protection Mean?
Understandable, very much so. So, just for the audience, when we’re talking protection, what does that actually mean? Could you talk about some of the policies available for a borrower when they’re taking out a mortgage?
Types of Policies
So, typically, the main policies that we focus on are life insurance, critical illness cover, and income protection. There are other areas as well, such as business protection, but when it’s our clients with a mortgage, these are the main three that we focus on to begin with.
1. Life Insurance
Life insurance provides a payout to your beneficiaries if you pass away during the term of your policy. This ensures that your mortgage can be paid off, protecting your family from financial strain.
2. Critical Illness Cover
Critical illness cover pays out a lump sum if you are diagnosed with a serious illness covered under the policy. This helps cover medical expenses, mortgage payments, and other essential costs during recovery.
3. Income Protection
Income protection provides a regular income if you are unable to work due to illness or injury. This ensures that you can continue to pay your mortgage and manage living expenses even when your earning capacity is affected.
4. Business Protection
Business protection policies are designed for business owners and key employees. While not typically necessary for most mortgage clients, it can safeguard your business loans or partnerships in case of serious illness or death.
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Should Borrowers Have Just Life Insurance?
Okay, and would you say that the borrowers should have just life insurance cover?
Rachel’s Explanation
There’s no right or wrong, um, really everybody should have a bit of everything in place. If you’ve got an income and you rely on that income, you should look at protecting it. If you want to make sure, you know, if something happens to you in terms of serious illness, again, you should have that protection in place. So, while it might not be affordable to everybody to have everything in place, it should be considered.
And I suppose your role would be, because of the experience that you have, you’d have that conversation then with the borrower, highlight their needs and maybe their shortfall, and obviously relay the cost and the budget to them.
Exactly, yeah, so we would have a conversation, see what they’ve got in place already, if anything, look at any employer benefits. I can then highlight their shortfalls to them and make a recommendation based on that, again, within a budget that’s affordable to them.
Myth Busting: Do Insurers Pay Out?
Rachel, I just want to do a bit of myth busting. Yeah, what would you say to the audience who say that life insurance companies, or critical illness, or income protection companies don’t pay out at all?
Rachel’s Response
Yeah, you see a lot of that, and all of the providers that we use, their claim stats show that they pay 98 or 99% of their claims. Those one or two percent of claims that aren’t paid, it’s because something hasn’t been disclosed on their application. So, maybe they wouldn’t have been covered in the first place, or the conditions were not met.
For example, with a critical illness claim, they might be trying to claim for something that they’re not covered for. Sixty-seven percent of those critical illness claims are for cancer alone, and half of that is for breast cancer. So, it shows that, you know, it’s something that we hear about every day; people suffer with it, and they are getting claims paid for.
That’s some fantastic claim stats there, Rachel. Thank you so much.
Scenario: Young First-Time Buyers
Right, Rachel, I’m going to give you a scenario. What would you say to a 23–24-year-old first-time buyer taking out a mortgage for the first time, who says no to life insurance cover and says, “It’s never going to happen to me”?
Rachel’s Advice
Being young is the perfect time to take protection because of the cost. You know, as you get older, you’re more at risk of things happening to you, and the cost only gets more expensive. So, when you’re young, get yourself protected. Typically, your premiums are guaranteed, so they’ll stay the same for the duration of the policy.
But also, with income protection, for example, the average age of a claim on income protection is 34, so it’s not that old. The most claimed-on thing with income protection is musculoskeletal issues. So again, it’s not a serious illness; it’s, you know, bad backs and problems like that that people are using it for. So, you know, being young isn’t a reason not to protect yourself.
Yeah, I suppose you can’t ever predict when you can have an accident at all.
Exactly, anything can happen to any of us. Unfortunately, you know, we’re not invincible. We like to think that we are, but it can really happen to any of us.
Yeah, some great advice there.
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Do You Need a Mortgage to Get Protection?
So, do I need to have a mortgage in order to have protection cover?
Rachel’s Response
Definitely not. Um, you know, if you’ve got young children and you want to make sure you’ve got some protection in place, there are options. For example, if one of you is a higher earner and you would be struggling without their income, family income benefit is a great policy to have.
If you rent or you’ve got financial credit commitments that you need to pay, again, income protection is a great one to have. You don’t need to have a mortgage in place to have any form of protection.
Conclusion
Fantastic, Rachel, thank you ever so much for joining us today.
You’re welcome. A fantastic insight there into protection cover and why it’s so important when you’re taking out a mortgage. If you have any questions for Rachel, please drop us a comment below, and also check out our other videos around getting a mortgage.
FAQs About Mortgage Protection
1. Do I really need mortgage protection?
Absolutely! Think of it as a safety net for you and your family. Even if you’re healthy and young, it’s better to be prepared for the unexpected.
2. Can I get protection without a mortgage?
Yes, totally! You don’t need a mortgage to get protection. Policies like income protection or family income benefit work even if you rent or have other financial commitments.
3. What type of protection should I choose?
It depends on your situation, but usually life insurance, critical illness cover, and income protection are the basics. A broker can help you figure out what fits your budget.
4. Will insurance companies really pay out?
They do! Most claims are approved—98–99%. The few that aren’t usually happen because of missing info or conditions not being met.
5. Is it too early for young people to get protection?
Not at all! Being young usually means cheaper premiums. Plus, accidents or illnesses can happen at any age, so starting early is smart.
