6 million homes at risk from lack of protection insurance

Research has highlighted that over half of the owners of residential UK property with a mortgage (around 6 million homes in total) could be at risk because they don’t have protection insurance to cover their monthly mortgage repayments if they were unable to work.

Insurance company Friends Life conducted a survey of 2,000 people and found that nearly 60% of them would rely on their partner’s salary or savings if they were diagnosed with cancer and unable to work. (Macmillan forecasts that, by 2020 nearly half the UK population will develop some form of cancer during their lifetime.)

However, almost half the people in the survey had less than £10,000 in savings, which is considerably less than the £54,629 figure for average household debt in the UK (Source: The Money Charity)

The Friends Life research found more than half (57%) of all UK mortgage payers do not have any form of protection insurance so would need to find another way to cover their monthly mortgage repayments if they were unable to work.

Steve Payne, managing director of UK Protection at Friends Life, said: “To find that 6 million homes are at risk because the owners have no financial safety net protecting them is almost unbelievable. Buying a house is the biggest investment most people will ever make and it’s hard to comprehend why people wouldn’t want to safeguard that.

“It has never been more important for people to be getting advice about protection insurance. Property prices are continuing to rise so a home as an investment is getting more valuable – another reason why protecting it is so important.”

Five myths about protection insurance

Myth 1: It doesn’t pay out.
Fact: It pays out 90% of the time.
The companies who provide life cover, income protection and critical illness insurance publish claims statistics for these products. They actually pay 90% of all claims. A total of £6 million is paid out every day for claims on these policies.

Myth 2: It’s expensive.
Fact: It’s not that expensive.
According to industry figures, people spend an average of £27 a month on protection policies – about the same as half a tank of petrol in the family car, although, when asked to name a sum they would be prepared to pay, it is almost double that. A 30 year-old non-smoker can buy £200,000 of life cover for 20 years for just £10 a month.

Myth 3: The State will always provide.
Fact: No it will not.
It is true that you can claim Employment and Support Allowance from the State if you suffer illness or disability and are unable to work as a result. However, for those over 25, this is around £71 a week for the first 13 weeks, then just over £100 a week. But a protection insurance policy’s payout is likely to be much higher. Importantly, if you die, the State does not make a significant payout to your dependents – that will only come from an insurer with whom you have life insurance or family income benefit cover.

Myth 4: Your employer will look after you.
Fact: Not necessarily.
According to a report by global insurer, SwissRe, more than 75% of all UK employers, especially small and medium-sized enterprises, do not provide life insurance, income protection or critical illness cover for their employees. If you think you are covered by the terms of your employment, you should check with an adviser to make sure that you have what you need.

Myth 5: It won’t happen to you.
Fact: No one is immune from illness.
Macmillan forecasts that, by 2020 nearly half the UK population will develop some form of cancer during their lifetime and many people are involved in accidents each year – some serious enough to keep you off work and reduce or remove your income. This is a particular risk if you are self-employed and need to be fit and well to carry out work for clients.

It pays to consult a specialist protection insurance adviser like Marchwood IFA to find out whether you, your family and your home are protected from life’s unexpected events!