The average payout for a life insurance cover falls short of the average outstanding mortgage and for people taking out new loans that “protection gap” is growing bigger, insurer SunLife says.
New research by SunLife shows that the UK’s famous “protection gap” is caused by under-insurance as much as it is by no insurance.
Almost a third (29 per cent) of people take out life insurance when they take out a mortgage, while nearly a quarter (23 per cent) take out cover after the birth of a child.
However, the average life insurance payout in the UK currently stands at £51,500, which would only cover 62 per cent of the average outstanding mortgage (£83,000) in the UK.
For people taking out new mortgages, the gap is even greater – £51,500 would cover less than a third (31 per cent) of the average new mortgage of £167,000.
Dean Lamble, managing director at SunLife comments:
“Although the UK average life insurance payout is just £51,500, for our Family Life Insurance term product, the average cover that new customers are taking out is £116,692, which is 40 per cent more than the typical outstanding mortgage.
“Yet that in 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.”
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