Warning for mortgage holders without life insurance
Becoming a mortgage holder is a huge responsibility, particularly when you consider how much debt you’re taking on. You need to take a long look at your finances to ensure you’re prepared for every eventuality, and part of that is investing in suitable life insurance.
It is imperative that you think about the potential consequences if the unforeseen were to happen to see how vital life insurance can be. You could be at risk of losing your home if you were unable to work, but an even more sobering thought is that you could be leaving your partner with the burden of a debt they’re unable to pay on their own. Doesn’t it make sense to invest in suitable life insurance cover?
Hopefully, yes, but unfortunately it seems that not everyone is aware of the risks involved. Figures from Scottish Widows have in fact revealed a fall in the number of mortgage holders taking out life cover, with just 50% having a suitable policy.
This is in addition to the fact that just 17% of mortgage holders have critical illness cover and only 7% hold income protection policies, both very important insurance covers to protect your family and way of life.
These are very worrying figures, particularly when 19% of respondents said they didn’t know if they’d be able to cover bills if they or their partner couldn’t work, and 48% said their savings wouldn’t last for more than a couple of months at most.
A lot of respondents overestimated the amount of support they’d receive from their employer as well as the state. Some 64% believed their employer will pay them either a full salary or a full salary followed by a partial salary if they were off work for an extended length of time, when in reality most people will only be eligible for Statutory Sick Pay (SSP) at £87.55 p.w. for up to 28 weeks.
So, consumers can’t rely on other people to provide financial help should they be unable to work, and when you consider that household expenditure is only ever increasing – mortgage holders now spend an average of £1,393 each month on household costs, compared to £1,326 in 2013. When you consider that these figures were published before the possibility of rate rises comes into play, it’s even more important to be prepared.
Richard Jones, of Scottish Widows, commented on the findings: “Protecting a home is about protecting a way of life that encompasses family, community and often a business. With this in mind, the impact of losing a home could be even greater than we initially realise.”
“Whilst affordability cannot be ignored, people with mortgages do need to review and develop a more robust plan to ensure they are protected should the unforeseen happen. It’s all about making sure you have the right cover at the right time of your life, giving people the peace of mind that their families will be able to keep their home and be financially covered come what may.”
Essentially, if you don’t have suitable cover in place you’re leaving yourself and your family financially exposed.
It would be wise to ensure that you are not be one of them. Life insurance will of course be an additional outlay but it’s a small price to pay to protect your family’s future. Just as important are the likes of critical illness cover and income protection which can provide security of an income each month.
There are various different types of cover you can choose from depending on your circumstances and budget, but it all comes down to being prepared. You wouldn’t want to run the risk of losing your home if the worst were to happen.
Post courtesy of Moneyfacts.