Families skimp on life insurance to save on mortgage costs

Millions of borrowers (with £318 billion of mortgages) have not bothered to protect their debt for their families.

The figure represents 43% of all mortgage borrowers, and is increasing as the credit crunch bites. The last count was in 2006 when £217 billion of mortgages were highlighted as not having life cover.

As mortgage lenders have slashed the amount they are lending, one of the conclusions from the figures is more and more borrowers are struggling to make ends meet and see cancelling insurance cover as a short-term saving.

Under probate and inheritance rules, if a couple, married or living together, are joint tenants, responsibility for paying the mortgage goes with the transfer of ownership of the property if one of the partners dies.

The research indicates on average, borrowers have outstanding mortgage balances of £44,000. Almost a third (32%) of 35 to 44 year olds do not have any life insurance to protect their mortgage payments, and over one third (34%) of 45 to 54 year olds do not have cover either.

Young mortgage holders are less likely to have children, so life insurance to cover a mortgage is less important, but many of those in age groups who are likely to have dependents are also unprotected, with 32% of those aged between 35-44 and 34% of those aged 45-54 not protecting their payments.

Lucy Hunter, of Sainsbury’s Life Insurance, who researched the figures, said: “Life insurance provides financial cover should the unthinkable happen, enabling people to be secure in the knowledge that their dependants could receive a cash lump sum if they were to die.

This is particularly important for homeowners, who should take care not to overlook life insurance as it can help to ensure peace of mind that the property is paid for upon death, allowing loved ones to continue living in the family home, and it could also alleviate any financial burden, therefore providing financial security.”

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