Case Study: First Time Buyers - Reducing Mortgage Protection Costs

The starting point

Simon and Petra were among our early clients in 2004. They’d recently bought their first home together and, like many young couples, they were focused on completing the purchase. Their estate agent’s in-house adviser suggested they take out a package of policies “to get the mortgage they wanted”.

A couple of months later, Petra came back to us after noticing they were paying nearly £300 per month in insurance premiums. The cover was described as comprehensive and “good”, but the cost was leaving them with very little breathing space. They were in their twenties, had no children, and wanted to be able to enjoy life—yet their monthly outgoings meant they could barely afford anything beyond the essentials.

What we reviewed

The original protection package included:

• Life cover
• Critical illness cover
• Income protection
• Accident, sickness and unemployment (ASU) mortgage payment protection

The first step was to understand what each policy was intended to do, and—just as importantly—what it would realistically pay for in the situations that mattered to them.

Removing cover that didn’t match their reality

We began with the ASU mortgage payment protection. The key question wasn’t whether the policy sounded reassuring—it was whether it would be useful in the circumstances it was designed to cover.

When we explored the “unemployment” element, it became clear the cover was unlikely to be relevant. Simon was ex-army and working as a lorry driver, and Petra was a nurse. Both were confident that if they were ever made redundant, they would be able to find alternative work.

We also discussed how payment protection policies typically operate in practice, including the difference between being made redundant and other reasons you might stop working. Once we matched the policy to their actual employment position, the unemployment aspect didn’t provide the value they were paying for.

Outcome: we removed the ASU unemployment element because it wasn’t aligned with the risk they were trying to insure.

Making income protection work harder for them

Next, we looked at income protection. The structure of the policy mattered as much as the headline cover.

Simon and Petra had been placed on an expensive setup with a one-month deferred period. In practical terms, that meant they were paying more while the policy would only start paying after a very short waiting period.

We compared that to their likely income position if they were unable to work:

• Simon’s benefit would be limited to statutory sick pay.
• Petra, as a nurse, would receive full pay for an initial period, followed by half pay.

That difference in how long they could expect to be paid through their employer changed what “good value” looked like.

Outcome:

• For Petra, we advised replacing her existing cover with a policy featuring a 12-month deferred period, reducing the cost while still providing meaningful protection.
• For Simon, we advised moving from a one-month deferred basis to a three-month deferred basis—cheaper than the original, but still appropriate given his benefit position.

We also emphasised a practical buffer: building savings to self-insure at least three months of mortgage payments. That approach helped bridge the gap between the time they might be unable to work and when cover would start paying.

Rebalancing life and critical illness cover

Once the income protection position was improved, we turned to the remaining part of the package: life cover and critical illness cover.

Both Simon and Petra already had death-in-service benefits through their employment. That meant they didn’t need to duplicate everything at the same level.

We reviewed what they still required beyond employment cover. In this case, life cover without critical illness was far more cost-effective.

Outcome:

• We cancelled the critical illness cover.
• We increased their life cover to ensure the overall protection plan still met their mortgage-related needs.

The result

By the time we’d finished reviewing and restructuring their protection, Simon and Petra were spending around £45 per month—a reduction from the nearly £300 per month they had been paying.

Instead of a “Rolls-Royce” style solution that left them with little money left for life, we put together something closer to what they actually needed: a plan that was proportionate, better matched to their circumstances, and designed to support their ability to keep up with the mortgage.

Simon and Petra are still clients today.