Liverpool Victoria (now know just as LV) have reduced the rates charged for their Mortgage & Lifestyle Protection policy. This product is a form of long-term mortgage payment protection insurance (MPPI), covering accident, sickness and unemployment (ASU).
The policy can provide income and home loan cover all the way up until retirement for sickness and injury and also provides a total of 36 months of unemployment insurance. The added benefit of this policy is that it comes with guaranteed rates, so premiums are guaranteed not to rise over the life of the policy.
Reduced pricing and increased flexibility
LV states that the changes made to the product have come from adviser feedback in the market. There is now greater flexibility to match the deferred period on the policy with consumers sick pay and redundancy entitlement.
The rates charged for the policy have also been reduced for individuals in less risky occupations, or more specifically for those in occupation class one. This is an excellent move as the value of the product is clear but the rates were previously much higher than those for short-term MPPI.
Inclusion of an income guarantee
Another positive move is the inclusion of a mortgage guarantee, which was introduced to assist those individuals who have an uncertain level of income each month, such as the self-employed or those who rely heavily on commission or bonus based income.
With the policy it is necessary to provide evidence of earnings upon making a claim to support the level of cover taken out. For individuals with large earnings fluctuations the insurer will now accept an average of the clients monthly loan repayments over the previous 12 months as sufficient evidence if they cannot provide evidence of income instead.
Move in the right direction
The head of protection at LV, Mark Jones, stated that the feedback they had received from advisers pointed to two main downfalls of the MPPI product.
The first downfall related to the fact that consumers wanted the ability to choose different deferred periods for the incapacity (accident and sickness) element of the product from that of the unemployment cover element of the policy. This improvement makes perfect sense as cover should be aligned with sick pay entitlement which may vary considerably from redundancy entitlement.
For example, individuals in professional occupations can often have over six months of full sick pay entitlement but receive only minimal redundancy entitlement, possibly amounting to only two months pay. In this instance it would make sense to set the deferred period for incapacity at six months but the deferred period for redundancy at two months, which is now possible with this policy update.
The second concern for insurance advisers related to the rates charged. It was often very difficult to promote this LV product to consumers because of the large difference in price as compared to short-term mortgage insurance, even though the long-term LV product provided a far greater degree of cover.
The policy has now been updated to include a new lower rate band for individuals in lower risk occupations, which Drewberry welcomes with open arms.