LV= Mortgage and Rent Cover (Protection Review: Silver, Adviser score: 6.3)
LV’s Mortgage and Rent Cover plan is designed to protect customers’ monthly mortgage or rental payments should they be unable to work due to illness or injury.
Cover is based on the customer’s monthly mortgage or rental payment and up to 100% of that can be insured. The minimum amount of cover available is £100 and the maximum is £2,000 a month. Premiums are level and guaranteed throughout the policy’s term and an own occupation definition applies. There is also a waiver of premium option. Waiting periods of 1, 2, 3 and 6 months are available. Maximum benefit period is one or two years and customers must be aged between 17 and 59 at outset. Minimum term is five years, and maximum term is to age 70.
No financial underwriting is applied upon application. Instead, the customer just needs to show documentary evidence at application to show the regular mortgage or rental payment that they’re legally responsible for.
The policy includes a Mortgage and Rent Guarantee which guarantees LV will pay the full chosen amount of cover throughout the claim. The policy also includes a range of guaranteed increase options so customers have flexibility to increase their cover later as their circumstances change.
For mortgagors, a 'Pay my mortgage' facility enables customers to choose to have all or some of their claim payments paid directly to their lender. That can have State benefit advantages.
The policy is part of LV’s Flexible Protection Plan menu plan and includes access to LV= Doctor Services and LV’s Member Care Line.
Comment: The rental market was long ignored by mainstream insurers so it’s good to see a growing trend to cover generation rent as well as mortgagors.
In the past, both groups were able to take out PPI (payment protection insurance) but the virtual demise of PPI following a series of highly damaging misselling scandals has meant too many borrowers and renters now have no form of income protection cover. Full IP cover is available but sales remain far below PPI at its peak and the plan is too often seen as over complex and too expensive.
This new plan from LV meets the need for a better alternative to PPI and also opens up the under 30s market too.
There are issues however relating to cover. First, while many old PPI policies would cover up to 125% of your monthly rent/mortgage, this plan applies a 100% limit.
For renters, if their rent goes up, the Guaranteed Increase Option enables them to increase their cover accordingly, with no new health or lifestyle questions. However, any increase in mortgage payments means fresh underwriting (unless the amount borrowed increases). As most borrowers only fix their interest rate for two years and interest rates are rising, many borrowers could see themselves underinsured when rates rise or else will have to be underwritten again, with all the uncertainties that involves. These issues could be easily resolved, so we hope LV will look to do so.
Otherwise though we commend LV for coming up with a simple IP based solution that should appeal to a great young buyers and renters.
Plus points: Simple to buy and understand IP cover for mortgagers and renters; Can continue if the customer switches between borrowing and renting; Guaranteed insurability.
Not so plus points: If interest rates rise, customers will become underinsured or else be subject to underwriting again if they want their cover to continue to match their mortgage payments; Excludes second and other properties; Max two years benefit only; No option to include unemployment cover (as PPPI did); Level cover only; Not a substitute for full IP cover.
Website: https://www.lvadviser.com/.
Rating (max 10): Overall: 7. Silver
Tags: IP; LV=
I Mark: No