Mortgages and bills left vulnerable by life insurance gap

Britons are putting loved ones at risk by not taking out enough life insurance or income protection, either for their mortgages or to cover the cost of living.

Alliance & Leicester today revealed that almost one Briton in two has no cover in place to pay for bills and loans in the event of death or illness even though 88 per cent of adults are committed to paying monthly bills.

"Whilst people are aware of the need to cover their mortgage payments, the majority of people forget about protecting their other financial commitments," said Sarah Ennion, product manager at Alliance & Leicester.

"For example, if the main income earner in a family died or was unable to work due to illness, the household bills would continue to come in, the car loan would still need to be paid and so would the children's school fees," she added.

Just one person in 25 has cover in place for household bills; similarly only a small number of people have policies in place to cover credit cards, car loan repayments or school fees.

People are more likely to have a policy in place to protect their mortgage, but even then there are worrying gaps.

Friends Provident has found that one mortgage holder in four does not have an insurance policy in place to cover their home loan, and one person in nine with a policy admits that it is not enough to cover all of their mortgage.

Peter Hamilton, head of protection at Friends Provident, explained: "Most people are happy to insure their house, its contents, their car, travel plans or mobile phone but often give little thought to insuring the income that pays their mortgage and funds their lifestyle. Death, long term sickness and disability are subjects that most of us would rather avoid discussing."

Friends Provident pointed out that mortgage cover is available for £1.80 a week - less than the cost of a pint.

The life and pensions company added that close to three-quarters of the people without mortgage cover would lose their homes in the event of a death.

Reasons given for this lack of cover included the belief it was unnecessary, it was expensive, and they thought the risk was worth taking.

"Life assurance cannot lessen the emotional impact of such events but it can soften the financial difficulties should the worst happen," Mr Hamilton concluded.