Nearly one in two mortgage holders do not have life insurance to protect their mortgage, according to a new survey from Sainsbury’s Finance. It also found a 47% increase in mortgages not covered by life insurance since it carried out a similar survey in 2006.
Overall, the data show that over 7.1million people, with a total mortgage debt of £318 billion, have no life cover in place to protect their home loan. The supermarket bank highlights the serious consequences; “If these people were to die, their loved ones may not be able to afford to make the mortgage repayments and ultimately in some cases may not be able to carry on living in their home.”
Sainsbury’s fear that the recession has played its part in the increase in the number of unprotected mortgages with people keeping a close eye on their finances and being less inclined to spend part of their income on life insurance.
The proportion of unprotected mortgages was higher in the younger age groups – 62% of mortgage holders aged 18-24 don’t have their mortgage protected. Sainsbury’s points out that these younger people are less likely to have dependents, “so having life insurance to cover their mortgage is less important” – however, whilst this is true for insurance that covers you in the event of death, it ignores the need for people to protect themselves in case they lost their income and were unable pay their mortgage payments in the event of illness, accident or unemployment.
Also, the younger you are, the cheaper life insurance is, so it pays to get suitable cover in place when you take out your first mortgage.
The overall life insurance protection gap in the UK is a staggering £2.4 trillion according to the reinsurance company Swiss Re and there are plenty of reasons why people don’t take out insurance to protect themselves. Cost is one of the main reasons, particularly in the current economic climate, but life insurance does not need to be expensive. Also, there is the fact that some life cover is better than none at all, so you can take out a level of cover that suits your budget.
Even having part of your mortgage covered could be enough to give you and your family the peace of mind that your home is protected.