Mortgage customers who opt for the life insurance policy offered by their lender are overpaying by £310 million every year, the Post Office has found.
The research revealed that 34 per cent of people completing a mortgage application buy life insurance
through their mortgage provider, potentially spending an additional £2,000 each.
Furthermore, many think that this cover is compulsory, not realising that they do not have to take it out and could find it cheaper elsewhere.
Of those who opted for their mortgage provider's life cover, 35 per cent said that they felt pressured into buying it, or believed that it was mandatory to purchase life insurance in conjunction with their mortgage from the same lender.
More than half said that it was simply more convenient to get their life insurance from the same source, rather than shopping around for a better deal and savings hundreds or even thousands of pounds over the term of their mortgage.
Some who take the easy option even seem to be aware of the potential savings they could be making by going elsewhere, with just 16 per cent saying that their mortgage provider offered them the best value on their life insurance policy.
Duncan Caesar-Gordon, head of protection at the Post Office, said that with homeowners’ finances already being stretched in the current financial climate, it is "essential that people save money where they can", and compare life insurance quotes
before they buy.
It is "vital that homeowners understand it is not a requirement to take out life insurance with the same company which provides your mortgage." he continued. "People have the right to shop around across the market and decide for themselves which product offers them the best value and is the most suitable for their life cover needs."
The Post Office's research revealed a great discrepancy between the monthly premiums of life insurance from different providers, ranging from £13 to more than £20, a difference of almost £2,000 over the course of a 25 year mortgage.
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