Skip to content
Over £433bn mortgage debt not covered by life insurance – do homeowners need a policy?
Over £433bn of mortgage debt is not covered by life insurance, according to a report by insurance firm Beagle Street.
Taking out a life insurance policy can get pushed down the to-do list when buying a home and even fall off it completely. But not having a policy in place could put your family under huge financial strain when you die.
Read on to find out where the ‘mortgage cover gap’ is greatest and whether a life insurance policy makes sense for your circumstances.
The mortgage cover gap across Britain
The potential financial consequences should homeowners die leaving their partner to foot the bill without insurance in place has been labelled the ‘mortgage cover gap’.
Beagle Street says estimates vary for the number of mortgaged households which don’t have a life insurance policy but it has taken the most conservative estimate (26% of mortgage households) to calculate the financial risk borrowers could be taking, using a combination of house price data, average loan-to-value rates and mortgage debt pentration.
The figures in the table show the total mortgage debt estimate for each region of England as well as for Wales and Scotland.
- Find out more: what is life insurance? The different types explained
Do I need life insurance if I have a mortgage?
Unlike car insurance, life insurance is not a legal requirement. It is however the best way to ensure your loved ones are protected after you’ve gone, especially those who depend on you such as children and elderly parents.
Mortgage protection life insurance is another name for Term life insurance. The length of cover, or term, is the same as your mortgage – 30 years for example – and the sum matches how much you have borrowed. So there will be enough money to pay off your mortgage regardless of when you die.
If you took out a mortgage with your partner or sibling you may want to consider a joint life insurance policy. If only one of you has a life insurance policy, the amount will only cover their portion of the mortgage. If both of you die, the family will still be left to cover the half of the mortgage that is not covered by a life insurance agreement.
- Find out more: how to write life insurance in trust
Do I need life insurance if I own my home outright?
If you have paid off your mortgage you will no longer need to have a mortgage protection life insurance policy however, your family will still have other costs that you may want to help them with.
Family income benefit insurance for example is a policy that pays a monthly sum out to your family that can help with child and household costs as well as any other outgoings.
So as long as you have dependents or an income that others rely on, a life insurance policy may br a good idea regardless of if you own your house outright or not.
- Find out more: income protection insurance explained
The cost of a life insurance policy
With the cost-of-living crisis continuing to affect millions of families, costs for life insurance policies are becoming even less of a priority.
However, the report revealed that a 30-year old non-smoker taking out a decreasing term life insurance policy of £200,000 would pay £10 a month. This is less than a phone contract, cinema ticket or two pints of beer.
Your life insurance premiums are calculated based on your age, health, pre-existing health conditions and your lifestyle (alcohol consumption, smoking and any dangerous leisure activities).
If it is something you are considering check out our life insurance and protection advice guides to help you make the right decision for you and your family.
Find out more and get advice on life insurance using the service provided by LifeSearch.
Which? Limited is registered in England and Wales to 2 Marylebone Road, London NW1 4DF, company number 00677665 and is an Introducer Appointed Representative of the following: 1. Inspop.com Ltd for the introduction of non-investment motor, home, travel and pet insurance products (FRN 610689). Inspop.com Ltd is authorised and regulated by the Financial Conduct Authority (FCA) to provide advice and arrange non-investment motor, home, travel and pet insurance products (FRN310635) and is registered in England and Wales to Greyfriars House, Greyfriars Road, Cardiff, South Wales, CF10 3AL, company number 03857130. Confused.com is a trading name of Inspop.com Ltd. 2. LifeSearch Partners Limited (FRN 656479), for the introduction of Pure Protection Contracts, who are authorised and regulated by the FCA to provide advice and arrange Pure Protection Contracts. LifeSearch Partners Ltd is registered in England and Wales to 3000a Parkway, Whiteley, Hampshire, PO15 7FX, company number 03412386. 3.Which? are an Introducer Appointer Representative of Optimise Media Limited (FRN 313408), for the introduction of HSBC Group, who are authorised and regulated by the Financial Conduct Authority to provide credit brokering activity. Optimise Media is registered in England and Wales to Exchange Street Buildings, 35-37 Exchange Street, Norwich, England, NR2 1DP and company number 04455319. We do not make, nor do we seek to make, any recommendations on financial products or services that are regulated by the FCA, as we’re not regulated or authorised by the FCA to advise you in this way. In some cases, however, we have included links to regulated brands or providers with whom we have a commercial relationship and, if you choose to, you can buy a product from our commercial partners. If you go ahead and buy a product using our link, we will receive a commission to help fund our not-for-profit mission and our campaigns work as a champion for the UK consumer.
