One-third of new debts do not have life cover
There is a huge gap between the number of new mortgages sold to consumers and the number of mortgage-related life assurance policies written, suggests a new report.
Analysis carried out by independent financial research company Defaqto found that, in 2009, the Association of British Insurers (ABI) recorded 636,973 new mortgage-related life assurance policies written, but the Council of Mortgage Lenders recorded 925,000 new mortgage advances.
Ben Heffer, author of the report and Defaqto's insight analyst for protection, said: "In some cases, there may be prevailing individual circumstances that dispense with the need for life cover. However, the figures suggest that there are many people taking on debt whose loved ones would have no means of paying it off for them if the worst happened. The protection gap does not just apply to life cover but is also a real problem when you look at income replacement products, with so little income protection being sold."
The report suggests that as consumers reduce their household expenditure in order to tackle debt, those in employment may have more disposable income, presenting the insurance industry with a "key opportunity" to sell more protection products.
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