The latest data from Scottish Widows has revealed that approximately half of the UK’s mortgage holders have no life cover in place – equating to 8.2 million people financially exposed should the worst happen.
The research also found that only 20% have a critical illness policy, leaving many more millions at risk of financial hardship or losing their home if they were to become seriously ill.
33% admit that if they or their partner were unable to work for six months or longer due to ill health or personal injury, they’d be unable to live on a single income. And 43% of those who couldn’t cope with a single wage say they would resort to dipping into their savings in order to survive.
Yet 43% say their savings would last for no more than a couple of months and 15% don’t even know how much they have, meaning they could be relying on backup which doesn’t actually exist.
Just under a quarter (23%) could only afford to pay household bills for a maximum of three months if they or their partner were unable to work, and 23% could make a maximum of just three monthly mortgage payments. Another 15% admit they’re not actually sure how long they’d be able to cope with their mortgage payments.
Welfare reforms make the case for financial protection all the more pressing. A quarter (25%) of mortgage holders who say they’d be unable to live on a single income if their partner were unable to work also admit that they’d rely on state benefits to ensure they could manage financially.
But changes to Support for Mortgage Interest, which is the only safety net in place for many families if they were unable to pay their mortgage, mean that people now have to wait 39 weeks before receiving this benefit instead of the previous 13, which could be too late for many if they have no other protection in place.
Johnny Timpson, protection specialist at Scottish Widows, says: “None of us want to think about the worst, but our findings show that there are an alarming number of mortgage holders who are putting themselves at significant risk by failing to arrange cover for the unexpected.
Many people believe that they’ll be able to rely on the State if the unforeseen happens, but recent cuts to welfare benefits are exacerbating their vulnerability.”
Chris Gowland, Mortgage Director at Halifax, said: “Taking out a mortgage is the biggest financial commitment many of us will ever make, so it’s concerning to see that only half of the UK’s mortgage holders have taken out life assurance, and even fewer have critical illness cover.
Having a financial plan in place will help protect your home in this type of eventuality and give greater peace of mind when it comes to what may be your greatest financial investment.”