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Many mortgage holders have no protection cover

As levels of protection cover drop, an increasing number of mortgage holders are financially exposed. Around 14.5 million UK adults have a mortgage but only 50% hold life cover, leaving the rest at risk of losing their home if they are affected by unforeseen events

Nearly a fifth of mortgage holders said they had no idea how they would cover their household bills if they or their partner were unable to work due to incapacity, serious illness, an accident or death. A further 48% said their savings would only last a couple of months.

Mortgage holders may also over-estimate the support they would receive from other sources, including their employer and the state. Sixty-four percent believe their employer would pay them either a full salary or a full salary followed by a partial salary if they are off work for a long period of time. Whereas the reality is that people may be eligible for Statutory Sick Pay (SSP) at £87.55 for up to 28 weeks. Employees may also be entitled to Occupational Sick Pay, a payment made over the level of SSP, dependent on a company’s policy and often their length of service.

When you consider that reported household expenditure for mortgage holders has increased by £65 a month, things look more worrying. Mortgage holders now spend an average of £1,393 per month on household costs, compared to £1,326 in 2013. Their situation could worsen if interest rates rise, potentially pushing an increasing number of mortgage holders into severe difficulty; this includes a high number of first-time buyers who have never experienced a rise in rates.

Protection cover amongst mortgage holders has dropped since last year with only 50% currently owning life insurance, compared to 54% in 2013. In addition, just 17% of mortgage holders have critical illness cover, down from 20% in 2013 and only 7% hold income protection, a drop of 3% since last year, according to ourlatest Protection report.

Richard Jones, our Director of Annuities, Bancassurance and Protection, Scottish Widows said: “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.”


References

  • The Scottish Widows Protection Report takes an in-depth look at the habits and attitudes of the UK adult population in relation to protection and financial robustness. Research was carried out online by YouGov who interviewed a total of 5,221 adults between the 30th October and 8th November 2013. The figures have been weighted and are representative of all UK adults (aged 18+).

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A fifth of mortgage holders said they had no idea how they would cover their household bills if they or their partner were unable to work due to incapacity, serious illness, an accident or death. What measure have you got in place to manage your finances?

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