Rob Harvey supports Protection Guru in it’s detailed research & benchmarking of protection products and features. He works alongside the team in helping drive product innovation and improvements with insurers and engages with adviser firms in ensuring they have the right tools & resources at their disposal to deliver the best protection advise. Prior to joining Protection Guru Rob spent 9 years at protection specialists Drewberry, where he worked as an adviser, learning & development manager and finally head of health & protection. In his spare time and when not out enjoying the pubs & bars of Brighton, Rob collects vintage clothing, is an historic motor racing enthusiast and avid country walker.
So setting the DTA interest rate at a default of 8%, whilst the actual interest rate might be 4% or less (fixed for 5 or 10 years) is best advice……?
At best the client is paying for additional cover they don’t necessarily need……so surely it would be better to be able to amend the DTA IR to mirror the actual mortgage IR…….?
Whilst there are two providers who offer a mortgage guarantee, the interest rate has to be set at 5% or 7% respectively, with a promise to pay any shortfall, only if a number of conditions are met (for example, not behind on mortgage repayments!).
Thanks for your comment Andy. In my humble opinion, your comment here highlights exactly why a mortgage guarantee is preferable. There are very few clients that will track the interest rate situation and immediately think “I need to update the interest rate on my mortgage cover”. Whilst it is great that Zurich offer the ability to change the interest rate mid term, in the real world very few people are actually going to do this. As such the lower the interest rate you select the higher the risk there is that the policy will not cover the full amount outstanding on the mortgage. Where an adviser is willing (and has the ability) to regularly track the interest rates and the interest rate set on every one of their clients’ policies, your point stands up, however I do not know any advisers that do this?
So setting the DTA interest rate at a default of 8%, whilst the actual interest rate might be 4% or less (fixed for 5 or 10 years) is best advice……?
At best the client is paying for additional cover they don’t necessarily need……so surely it would be better to be able to amend the DTA IR to mirror the actual mortgage IR…….?
Whilst there are two providers who offer a mortgage guarantee, the interest rate has to be set at 5% or 7% respectively, with a promise to pay any shortfall, only if a number of conditions are met (for example, not behind on mortgage repayments!).
See full article here – https://www.zurichintermediary.co.uk/advice-matters/time-to-pay-an-interest-in-decreasing-term-rates
Thanks for your comment Andy. In my humble opinion, your comment here highlights exactly why a mortgage guarantee is preferable. There are very few clients that will track the interest rate situation and immediately think “I need to update the interest rate on my mortgage cover”. Whilst it is great that Zurich offer the ability to change the interest rate mid term, in the real world very few people are actually going to do this. As such the lower the interest rate you select the higher the risk there is that the policy will not cover the full amount outstanding on the mortgage. Where an adviser is willing (and has the ability) to regularly track the interest rates and the interest rate set on every one of their clients’ policies, your point stands up, however I do not know any advisers that do this?