Life insurance Updated:
If you've got a mortgage, investing in suitable life insurance will always be preferable. It's designed to provide financial support for living costs and to ideally pay off the mortgage and other debts should the worst happen, but unfortunately, research has found that the typical payout falls far short of the amount required.
The research, from SunLife, found that the average outstanding mortgage is £83,000, but the average life insurance payout is just £51,500 – a £31,500 shortfall. The payout would cover a mere 62% of the average outstanding mortgage in the UK, and for people taking out new mortgages, the gap is even greater. That same £51,500 payout would cover just 31% of the average new mortgage of £167,000, so the potential financial stress involved is clear.
The UK has a notorious protection gap already – just 29% of people invest in life insurance when they take out a mortgage, while 23% take out cover after the birth of a child – but it seems that it could be as much due to under-insurance as it is to no insurance. And that's before we even get to the ongoing financial commitments that families will have to bear – life insurance should ideally provide a suitable sum to help pay bills or provide an income so life can continue as normally as possible, but if it doesn't even repay the mortgage, it could prove difficult.
Happily, the report went on to reveal that customers of one of SunLife's specific insurance products take out insurance to the value of £116,692, or 40% more than the typical outstanding mortgage. This is a far better sum and will help ensure that loved ones don't need to struggle financially should the breadwinner die, which could be a huge weight off people's minds. It's hoped that more people will follow suit, so make sure to carefully consider your life insurance needs – ideally by doing a calculation to work out how much you'll need to maintain your family's standard of living should the worst happen – and find suitable quotes to make sure you're fully covered.
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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