Treading carefully
MORTGAGE SOLUTIONS - 23RD MAY 2005
I write in response to recent comments by Chris Cummings of AMI who blames regulators for advisers reliance on mortgage payment protection insurance.
I agree with his sentiments that ‘advisers should not simply attach mortgage payment protection insurance to mortgage sales as a matter of course and should consider all the options available’.
As an advocate of properly sold, low cost mortgage payment protection insurance, I am compelled to raise notes of caution, which advisers must consider if they are not to be in breach of their duty of care to ensure that clients have sufficient financial resources to meet their mortgage repayments at all reasonable times – including periods of unemployment and disability.
Income protection is a brilliant product when it provides own occupation cover and a nominal excess. It does, however, have limitations – such as it is very expensive and insurers ‘cherry pick’ only healthy clients.
Critical illness has always been a brilliant product for the life insurance industry due to the vast commissions and fees to be earned. But if an adviser fails to fully explain the complicated limitations in cover, there can expect an action in negligence.
Accordingly, if you don’t wish to risk being sued, embrace the very reasonable FSA regulation and sell, where appropriate, the policy that fulfils the basic duty of care requirements.
Simon Burgess
Managing director
Burgesses
