Life cover payouts falling short of outstanding mortgages

According to SunLife almost a third (29%) of people take out life insurance when they take out a mortgage, while nearly a quarter (23%) take out cover after the birth of a child.

However, the average life insurance payout in the UK currently stands at £51,500, which would only cover 62% of the average outstanding mortgage (£83,000) in the UK.

For people taking out new mortgages, the gap is even greater – £51,500 would cover less than a third (31%) of the average new mortgage of £167,000.

Dean Lamble, managing director at SunLife commented:

“Although the UK average life insurance payout is just £51,500, for our Family Life Insurance term product, the average cover that new customers are taking out is £116,692, which is 40% more than the typical outstanding mortgage.

“Yet that in itself is very revealing – people are treating life insurance like a type of mortgage protection. Of course, if for example the breadwinner in a family was to die, being able to pay off the mortgage would be a big help. But, while that would take a significant burden off the family, it wouldn’t leave any money to pay the ongoing household bills, provide an income or mean the everyday things could carry on.”