Life insurance risk for homeowners

11 August 2004
Around a quarter of UK homeowners do not have enough life insurance to pay off their mortgage, a new survey reveals.

Many British families could face crippling bills or the loss of their home if the main breadwinner dies, according to research by online lender Egg.

The increase in households with inadequate cover is due to rising numbers of people remortgaging their properties.

The Egg study found that three out of four (74 per cent) of those who remortgage fail to increase the sum insured to take account of the extra debt.

The average gap between the amount of life cover taken out and the size of the outstanding mortgage has risen to £39,778. Britons are now facing a national shortfall of £113 billion between life cover and outstanding mortgage debt, almost 15 per cent of the UK's total mortgage debt.

The survey of 2,000 individuals revealed that more than 30 per cent of homeowners with insufficient insurance had decided against increasing the sum insured on the grounds it was 'too expensive', while a further 16 per cent had taken the decision to insure part of the mortgage debt, rather than the entire amount outstanding.

Mark Nancarrow, chief operating officer at Egg said: "The recent phenomenon of UK homeowners accessing equity in their properties, helping push household debt over the £1 trillion mark, has considerably widened the gap between homeowner debt and the value of their life insurance."
DeHavilland Information Services plc