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Insurance

Warning over life insurance mortgage cover

Adam Williams
Written By:
Adam Williams
Posted:
Updated:
03/06/2015

Many life insurance policies are failing to pay out enough to cover outstanding mortgages, a firm in the sector has warned.

Research by provider Sun Life showed the average life insurance payout in the UK was £51,500. This is not enough to pay off the typical outstanding mortgage of £83,000.

This £31,500 shortfall could leave relatives and partners with large bills to settle or force the sale of a property. Those who have recently taken out a mortgage could be facing a shortfall of more than £100,000.

Sun Life said the ‘protection gap’ was caused by those with under-insurance as much as by those with no insurance at all.

It found almost a third (29%) of people buy life insurance policies when they take out a mortgage, while nearly a quarter (23%) buy cover after the birth of a child.

Dean Lamble, managing director at Sun Life, said people should consider what their policies will pay out.

“People are treating life insurance like a type of mortgage protection,” he said.

“Of course, if for example the breadwinner in a family was to die, being able to pay off the mortgage would be a big help. But, while that would take a significant burden off the family, it wouldn’t leave any money to pay the ongoing household bills, provide an income or mean the everyday things could carry on.”


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