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One-third of new mortgages have no life cover

Almost one-third of new mortgages do not have life cover associated with them, Defaqto research shows.

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.

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  • amanda 11th October 2010 at 7:06 pm

    until the regulators and networks compliance bods understand the importance of “protection” there wont be any emphasis to “sell” it. weve seen non-disclosure figures inc, premiums drop,but still the compliance bods look for reasons for it not to be necessary and slate advisers for selling it “incorrectly”. There will always be people who have “enough” cover but not that many. To sum it up, who would say “NO thanks weve got enough money when an insurance claim pd out”?

  • KK 27th August 2010 at 4:49 pm

    What a load of nonsense. Single people without children realistically don’t need life insurance to protect their mortgage unless they feel they should leave a paid-up asset behind for their parents or siblings. The lenders are protected because the loan is secured on the property – if the borrower dies, the lender can sell the property to repay the loan, and if there is any surplus that would go to the deceased’s estate. It is people with children or partners who need life insurance so that if they die, the kids / partner are not left with a liability they can’t afford, or out of a home.

  • David 26th August 2010 at 9:11 am

    The really interesting thing about this story is that so far I have not seen any evidence of it being carried in a consumer facing website.

    The mainstream press are quick to report stories about finance when it makes firms look bad but something like this that could encourage some to reconsider their protection position gets no coverage.

    I agree with other comments on here about advisers needing to sell this type of cover but a bit of consumer education would not go amiss.

  • Sandra McWhirter 25th August 2010 at 4:57 pm

    I am one of those guilt parties that have no life cover but then I have 8x death in service benefits which more than covers my mortgage and loan. Why should i be forced to take out more life cover?
    I have full ASU so am covered in respect of sickness and unemployment so why should I be penalised?
    The whole idea of a financial adviser/mortgage adviser is to check these out and strongly recommend life cover if required. The mortgage offers all state that they should have life cover of some sort

  • Brian Melling 25th August 2010 at 4:15 pm

    Does the figures take into account single people with no dependents / BTLs / people who have enough insurance already (eg remortgages) / people who cannot get insurance at affordable rates due to loading etc….
    Making life cover compulsory who discriminate against the latter. We are advisers, not dictators. The FSA is accused of doing it to us then the above comments want to do it to customers.

  • Lee Harrison 25th August 2010 at 4:02 pm

    I am concerned about the number of intermediaries who continue to state that if a person is single with no children there is no need for life cover.. This is nonsense if a person has a mortgage and dies with encumbarance or worse still stays alive long enough with a terminal illness the family carries the burden of finance brother sister mum or dad… Also look at the current property market do you really think your house is going to sell over night if a person required cash to support them due to an illness. This excuse is a cop out as an advisor you should be able explain this easy enough. Having no life cover and using the excuse of its ok my mum will look after me is lack of knowledge of trauma a terminal illness causes in families as well a the financial burden.

  • Lee Harrison 25th August 2010 at 4:01 pm

    I am concerned about the number of intermediaries who continue to state that if a person is single with no children there is no need for life cover.. This is nonsense if a person has a mortgage and dies with encumbarance or worse still stays alive long enough with a terminal illness the family carries the burden of finance brother sister mum or dad… Also look at the current property market do you really think your house is going to sell over night if a person required cash to support them due to an illness. This excuse is a cop out as an advisor you should be able explain this easy enough. Having no life cover and using the excuse of its ok my mum will look after me is lack of knowledge of trauma a terminal illness causes in families as well a the financial burden.

  • Carl S Hall 25th August 2010 at 3:36 pm

    Lenders insist on Building insurance before completion of a loan, but not Life assurance, some clients think it is compulsary but when advised that its not, its the first thing thats cancelled after completion, its mostly down to cost then importance to the customer, and if not compulsary its so easy to cancel. I had more stay on the books before the FSA regulation made it such painful and lengthy excersise, and for what you get paid its not worth the hastle anymore.

  • Tom Cleary 25th August 2010 at 3:28 pm

    Life Assurance is cheaper now than it has ever been but some people still decline to take it. We are constantly met with the “It won’t happen to me” attitude which is completley ridiculous. All mortgage brokers should sell it because it is a win win situation but there is still a massive protection gap in this country…

  • Darren Newton 25th August 2010 at 3:19 pm

    A lot of this is a result of a lack of focus, skills and ability of poorly trained intermediaries who think that if they encourage the client to adequately protect themselves and the client gives an objection, they cannot overcome it or the client will go elsewhere. The best way to get competent at this is to go and talk to families whose lives have been devastated by an unfortunate event but protection saved them from the financial fallout and, then go and have a chat with a family who did not take the protection. The comparison will make you think completely differently.

  • R Cowell 25th August 2010 at 3:05 pm

    There was a time when insurance was an integeral part of any loan. Unfortunately legislation and ‘mis-selling claims chasers’ have conspired to bring about a situation which is very worrying.
    Time for lenders/insurers and government to put their heads together to avoid problems for many consumers.

  • David Booth 25th August 2010 at 2:46 pm

    Why like yester year is it not compulsory to assign life protection to the lender. In very few cases a person uninsurable would be underwritten differently by the lender. Can someone tell me why our mighty regulator allows this to continue. Or don’t they understand what a mortgage is!!!!! Surely that is straightforward In answer to the above response don’t the lenders need to protect themselves therefore a single person should have life cover.

  • anonymous 25th August 2010 at 2:38 pm

    I think this should be more focused on those who don’t have income protection. There can often be many good reasons for not having life insurance i.e. single people with no children. But income protection is a necessity for everyone who relys on their income to maintain their lifestyles – and isnt that just about everyone!