The average UK life insurance payout wouldn't be enough to cover the average outstanding mortgage, claims data has revealed.
The average shortfall is £31,500, based on an average outstanding mortgage of £83,000 and average life policy payout of £51,500, according to insurer Sun Life.
Average life insurance payout wouldn't clear the mortgage
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The average UK life insurance payout wouldn't be enough to cover the average outstanding mortgage, claims data has revealed. The average shortfall is £31,500, based on an average outstanding mortgage of £83,000 and average life policy payout of £51,500, according to insurer Sun Life. That means the life insurance policy would only cover two-thirds of the mortgage. However, Sun Life also revealed that among clients taking out new mortgages, the difference is greater still – with the average payout accounting for just a third of the average new mortgage of £167,000. Protection gap Despite the UK average life cover payout of £51,500, the insurer said that for its Family Life Insurance term product, the average cover that new customers are taking out is £116,692. While that's 40% more than the typical outstanding mortgage, its managing director Dean Lamble says it still gives cause for concern. "That is itself is very revealing – people are treating life insurance like a type of mortgage protection. 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." The insurer is highlighting what it calls the 'protection gap' to encourage people to make sure they are not underinsured should the worst happen. Almost a third (29%) of people take out life insurance when they take out a mortgage, while nearly a quarter (23%) take out cover after the birth of a child, according to Sun Life.
Source Moneywise http://ift.tt/1BGz7So
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