One third of new borrowers have no life insurance

Almost one third of new mortgages taken are not covered by life insurance.

A report by financial research company Defaqto reveals that 925,000 new homeloans were advanced during the course of 2009. However, only 636,973 new mortgage-related life insurance policies were written over the same period.

Life insurance cover is not compulsory for mortgage borrowers, although it is strongly recommended, as it is designed to at the very least pay off the amount owed to the lender should the borrower die.

The most basic type of life cover is relatively cheap and reduces in line with the shrinking mortgage debt.

Ben Heffer, author of the report and insight analyst for protection at Defaqto, pointed out that in some cases borrowers may not need life cover as they may have made alternative provision.

He said: "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.

"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."

In its report, Defaqto urges people to consider making their own provisions against sickness, critical illness, medical expenses and loss of income, as well as death.