Homeowners fail to get adequate life insurance

31 March 2008

Half of homeowners would not be able to repay their mortgage if partner died

New research has revealed that almost two-thirds of homeowners with mortgages do not have life insurance. Half of those who do have life cover fail to cover the total cost of their mortgage.

Research conducted by mortgage brokers John Charcol found that 59% of mortgaged homes do not have any life cover at all and at least half of the 41% that do have failed to buy adequate cover for the amount of mortgage they owe.

For the majority of borrowers, the implications of this could be absolutely devastating. These homeowners are likely to be plunged into financial crisis if the person responsible for paying half or more of the mortgage dies (i.e. a spouse, partner or anybody else with joint responsibility for the mortgage) – at a time when money is likely to be the last thing on your mind.

Recently, life insurance cover has decreased in price. However, it has been increasingly shunned by Britons over the past few years.

A recent report into the status of the UK’s life insurance industry, called ‘Term & Health’ by Swiss Re, found that between 2003 and 2007 sales of ‘term’ insurance (basic cover for a period of normally between 15 and 25 years) dropped by 23%.

However, separate research, by brokers ‘Lifesearch’ found that the price of the cheapest life cover policy decreased by 3% between March and September 2007.

In January consumer body, Which?, made increasing awareness around the importance of life cover its priority, warning that too many of us were hiding our heads in the sand. A spokeswoman for Which?, a consumer watchdog, said: “Buying life insurance with a mortgage makes us think about dying – and, of course, that’s still something none of us are particularly keen to contemplate.”

“It’s always easy to think, “OK I’ll do it later”, but if you have someone who depends on you financially, life insurance is a must. And the sooner you buy it, the cheaper it will be.”