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Millions of mortgage holders don’t have life insurance

Paloma Kubiak
Written By:
Paloma Kubiak

Nearly three million mortgaged households aren’t covered by life insurance which could spell financial worries for loved ones.

Life insurance isn’t compulsory but once homeowners take out a mortgage, it’s a recommended product to ensure mortgages are paid off should the policy holder pass away.

But according to Compare the Market, just 30% of UK adults have life insurance cover, equating to 8.1 million households.

This, it said, is significantly less than the 11.1 million mortgaged properties in the UK. And with rising levels of mortgage debt and unsecured debt, such as credit cards, this statistic is “particularly concerning”.

Compare the Market’s poll of 3,000 UK adults found that a third had no life insurance policy. But of those who did, 79% had never switched provider, meaning they could be paying over the odds for a policy. However, its research found that people with a life insurance policy pay an average premium of £22.45 a month.

It found a quarter of people buy life insurance policies through a broker, and a similar figure (24%) went through a mortgage provider, bank or building society – meaning they could be on a less competitive deal and paying over the odds. Only one in five (21%) said they sourced life insurance from a comparison site.

Dan Hutson, head of life insurance at Compare The Market, said: “Life insurance should be considered essential for those with a mortgage. It is concerning to see that so many people in the UK with a mortgage do not have protection, meaning family members, dependents or beneficiaries could sadly be saddled with debt should the worst happen.

“For those with life insurance, there are a number of ways in which you can make sure you’ve got right cover. First and foremost, shopping around ensures you are on the best deal possible. It’s also worth making sure you regularly review your policy – for example, although life insurance tends to get more expensive as you get older, making positive life changes, such as quitting smoking or losing weight, could potentially bring your premium down.”

Top tips to buy life insurance

Compare quotes:life insurance can be offered as a package within a mortgage, credit card or other loans. It can be easy to sign up there and then, but you should always shop around.

Get the cover right: check if your employer offers a ‘death in service’ benefit which could determine how much life insurance you need. Then think about your and your family’s circumstances: in the event of your death, will there be outstanding debts which would pass to loved ones? Will your household cope with the loss of your income? Do you want to leave a legacy for your family?

Health: could you make small changes to improve your health, such as quitting smoking? This could lower your premiums.

The perks available: many providers offer attractive perks such as reduced gym membership, or more specifically, an Apple watch from £29 upfront when you take out cover with Vitality.

Related: See YourMoney.com’s Life insurance and critical illness cover: do I need both? for more information.