It is well known that across the industry, lenders often place a condition on their acceptance of a mortgage that buildings insurance is put in place and maintained throughout the duration of the mortgage.

In practice however, there is anecdotal evidence very few lenders actually check to confirm cover remains in place after the mortgage has been accepted. This has been noted both for residential and buy-to-let mortgages, covering a large sector of the market.

It is vital financial intermediaries (advisers or brokers) ensure clients keep up payments on this important piece of cover.

Otherwise, should the worst happen, clients could be hit with a potential six-figure loss and subjected to lender scrutiny for breaching their mortgage arrangement terms.

If the mortgaged property is a buy-to-let, further difficulties and financial burdens arise when tenants are involved.

Protection gap

According to finder.com as many as six million UK homes do not have any form of home insurance, equating to around one in four properties.

Clearly, insurance is something clients tend to forget about. A report from AXA outlines some common reasons why people do not purchase buildings insurance; many feel they do not have the time, or they believe where they live is a safe area.

Another common argument is insurance is not worth the money; others are sceptical as to whether their policy will in fact pay out when they suffer a loss.

Advising on insurance

Whatever their thinking, there’s an important advice opportunity for financial intermediaries to get involved and assist clients who perhaps do not have the expertise to navigate the insurance market themselves.

Intermediaries who fail to offer general insurance advice are leaving their clients to source home or landlord insurance from other channels.

This probably means they will head to the internet and self-select a product from an aggregator site at the lowest price available.

By not selecting the best terms based on their circumstances, this may come at a cost. Clients could end up paying for cover they don’t actually need or want, which is why expert advice is so important.

No client should be left self-selecting a product for the most expensive asset they’re ever likely to own.

Doing so could lead to cover being missed or excessive mandatory excesses (such as a £1,000 escape of water excess) – meaning your client ends up footing the bill because the right policy was not purchased.

Financial strains

With Covid-19 impacting the market and household budgets, clients are trying to find ways to reduce their monthly outgoings and home insurance may be an area that suffers.

Unless the core of an intermediary’s business is general insurance, it can be easy to overlook. This is why as well as mortgages, pensions or life cover, the importance of home or buy-to-let insurance should be highlighted, alongside the potential ramifications of not having the proper cover.

Sadly, this cover is likely to be one of the first cancelled when an income is interrupted, particularly if a mortgage holiday is being taken, which is why financial intermediaries should use their best endeavours to remind clients that a condition of the mortgage is having insurance, cementing further the valuable long-term relationship.

Simplifying the process

With numerous general insurance providers in the market, those who offer a quick and easy application process, regular commission streams and in-house retention support will be popular.

Even if a non-advised service is offered, the option to include the insurance alongside, for example, a new mortgage application will simplify everything for a client.

Once a policy is sold, it is then simply a case of ensuring the client renews the policy in 12 months’ time – something retention teams can help with.

Keeping up to date with clients and their needs, especially during these unprecedented times, not only helps them, but boosts intermediaries’ income.

Mortgage brokers and IFAs are ideally placed to sell clients buildings insurance; they often have strong relationships and can go further still by upselling to include contents cover and any other additions deemed necessary.

Have you checked your clients’ assets are properly protected recently?

Chris Baron is head of marketing and distribution at 3XD