Last year the Association of British Insurers recorded 636,973 new mortgage-related life assurance policies written, but the Council of Mortgage Lenders recorded 925,000 new mortgage advances.
Ben Heffer, insight analyst for protection at Defaqto, says: “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.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.”
Defaqto says that on the back of rising unemployment, this is a key time for consumers to consider making their own provisions against sickness, critical illness, medical expenses and loss of income.
It adds that consumers are reducing their household expenditure, and as a result of lower inflation and having less personal debt to service, those in employment now have more disposable income, thus presenting the industry with a key opportunity to sell more protection products.