3rd June 2025

The Hidden Risk in Mortgage Advice: Ignoring Protection Reviews

Networks report that just one in four mortgages arranged today are backed by a mortgage protection plan. That figure is worrying enough, but even more concerning is that many mortgage advisers fail to revisit protection needs when clients switch rates - or even when they move home.

Most industry commentators agree: this behaviour runs counter to the spirit of Consumer Duty. But beyond regulatory expectations, this is simply a matter of common sense and client care. 

Here’s why.

Protection Plans Have Evolved – Your Clients May Be Left Behind

Since 2007, when the ABI’s critical illness working group simplified definitions in a failed attempt to future-proof the product, critical illness (CI) plans have advanced significantly. Each year, insurers enhance their condition lists and improve definitions, making policies more comprehensive and claimant friendly. 

Yet many clients remain on outdated plans that no longer reflect the best protection available. A scan through Financial Ombudsman Service (FOS) rulings reveals a familiar pattern: claims rejected because the condition suffered isn’t covered - despite being included in the insurer’s latest product range. 

One newspaper’s financial agony column recently shared the story of a reader who suffered a cardiac arrest, only to have their CI claim declined. Their policy didn’t include cardiac arrest as a payable condition, and while the client assumed it would fall under “heart attack,” the clinical definitions differ significantly.

Go further back, and the case of Hein Pretorius, who lost a leg in a traffic accident, gained national attention. His 2007 policy required the loss of two limbs to qualify for a payout. Today’s plans have moved well beyond such limitations.

Modern Plans Offer Better Benefits – Especially for Families

Today’s CI plans don’t just include more conditions, they also feature enhanced definitions for core conditions such as deafness, blindness, third-degree burns, and multiple sclerosis. Children’s cover has evolved too, with leading plans now:

• Starting from birth and extending to age 23
• Covering congenital conditions
• Allowing optional inclusion and a flexible sum insured
• Including benefits like pregnancy complications, 24/7 GP access, second medical opinions, and annual health MOTs

These improvements mean that even if your client is older, a modern plan - despite potentially being slightly more expensive - could offer substantially greater value and reassurance.

The Overinsurance Effect: Why Clients May Be Paying for Coverage They Don’t Nee

Critical illness policies are often set up on a level basis, even while the mortgage decreases. This creates a growing gap between the amount insured and the outstanding loan balance - what we call “overinsurance.”

Let’s say a client takes out a £175,000 mortgage on a 25-year repayment term. Compare this to a protection policy with a fixed 8% sum assured:

*£175,000 repayment mortgage over 25 years  

After 10 years, the insurance sum exceeds the mortgage by over 13%. By year 15, that gap grows to 22%. In some cases, this additional cover can offset the cost of upgrading to a better policy.

Consumer Duty: The Obligation to Review

Under Consumer Duty, advisers now have a formal responsibility to ensure that clients’ protection arrangements continue to meet their needs - not just at the point of sale, but throughout the lifetime of the mortgage. That includes: 

• Reassessing cover at remortgage or rate switch
• Aligning cover with current health needs and product enhancements
• Ensuring affordability and suitability of benefits

By failing to review, advisers risk client dissatisfaction, exposure to complaints, and, potentially, regulatory scrutiny.

Final Thought: A Matter of Responsibility 

If you’re arranging a mortgage, you’re helping your client take on a substantial long-term debt. Isn’t it your duty to help ensure that debt can still be repaid if ill-health or premature death strikes?

Advisers who ignore protection are not only missing an opportunity to better serve their clients - but they may also be falling short of their professional responsibilities.

It’s time to make protection reviews a standard part of mortgage advice, not a forgotten footnote.

Alan Lakey, CI Expert

Protection