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Life insurance disregarded by a third of mortgage borrowers

Life insurance disregarded by a third of mortgage borrowers

26 August 2010 / by Rachael Stiles

Almost a third of new mortgages do not have life insurance associated with them, new research from Defaqto has revealed.

The financial research company has highlighted the risk of taking on debts such as mortgages without having sufficient protection in place should something happen to the borrower, leaving their family to repay the debt.

The report points to figures from the Association of British Insurers from 2009 which show that 363,973 new mortgage-related life insurance policies were written, whereas the Council of Mortgage Lenders recorded a comparatively high 925,000 new mortgage advances for the same period.

Ben Heffer, author of the report and Defaqto's insight analyst for protection, said: "In some cases, there may be prevailing individual circumstances that dispense with the need for life cover. However, the figures suggest that there are many people taking on debt whose loved ones would have no means of paying it off for them if the worst happened."

Defaqto argues that at a time of rising unemployment, consumers should be considering their own provisions against sickness, critical illness, medical expenses and a potential loss of income.

"The protection gap does not just apply to life cover but is also a real problem when you look at income replacement products, with so little income protection being sold," Mr Heffer added.

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