13m Britons at risk with wrong level of life cover
Nearly 13 million people in the UK do not have the right personal protection insurance, leaving them vulnerable to unexpected bills in the event of illness or death.
Exclusive research for The Mail on Sunday by insurer Legal & General found that 43 percent of adults have some form of personal protection insurance, such as life insurance, critical illness or income protection.
These policies pay out an income or an amount to you or your loved ones if you become seriously ill, are unable to work or die.
But of the 23 million people covered by such a policy, more than half have not adjusted their insurance for milestones such as getting married, buying a house, having children or divorce.
For example, some policies pay off the mortgage if you become seriously ill or die. But policyholders often forget to increase coverage when they move and take on more mortgage debt, putting them at risk of a shortfall.
Staying safe: Of the 23 million people covered, more than half have not changed their insurance in line with milestones such as getting married, buying a house, having children or getting divorced
Two in five households surveyed said they would have to tap into their savings if their coverage fell short — and many would be forced to use credit cards or take out loans to pay for unexpected costs.
Alex Lawrence, 47, from Deal, Kent, pays a total of £43 a month on life and income protection policies with Aviva. The official took out the policies four years ago when he bought his first home.
However, he has since married and he and his wife Michelle, 39, have had two children; Eva, five, and Hudson, two. Alex plans to amend his policy so that, should anything happen to him, there will be enough to pay off the £185,000 mortgage on their three-bedroom house and to support his young family.
Alex says, “Life changes and we want to make sure that the family is well taken care of when something happens. Our son Hudson is autistic, and it makes you reevaluate what’s important in life. I want to leave more for them, so plan to increase coverage – and pay a little extra – for peace of mind.”
Legal & General found that 12.9 million personal protection holders made no changes when they got married (19 percent), had children (19 percent), moved into a home (19 percent), or divorced or separated (15 percent). ).
Rebecca Harvey, 36, from Widford in Hertfordshire, moved into a £560,000 three-bedroom semi-detached house with her partner last year. She previously lived alone in a £245,000 two-bedroom house in Harlow, Essex. When she moved, she adjusted her policy to cover the higher mortgage balance.
Rebecca, an accountant, says: ‘I paid £17 a month for serious illness cover with Aviva. Moving in with someone is a commitment that has made me think about the future – and we both want to be debt free in a few decades so we can retire early.
‘I’m going to pay £30 a month – almost double what I was paying before – to make sure the cover goes up from £160,000 to £224,000. It means if something happens, my share of the mortgage will be paid.”
Most people — 57 percent — have no personal protection coverage. The most popular form of protection is life insurance, which is taken out by one in five people.
One in ten has critical illness coverage and a similar number have income protection insurance.
Legal & General is concerned that there is a serious lack of understanding about all types of protection insurance – and the amount of coverage provided.
Legal & General’s Paula Llewellyn says: ‘It’s essential to have a safety net in place in case the worst should happen, but far too many people don’t have the right level of coverage due to a change in circumstances. It costs nothing to have this reviewed.’
Not only can circumstances change, but policies also vary widely. The Association of British Insurers industry association details the options, such as term plans, whole life plans and critical illness. An independent financial advisor can also provide support. Local specialists can be found through the branch organization Impartige.
Comparison websites such as MoneySupermarket, Compare The Market and Go Compare provide free quotes.
You need to check the fine print to make sure you’re getting your money’s worth. For example, if you purchase critical illness coverage, the included injuries and illnesses often vary from policy to policy.
Legal & General offers a free life insurance calculator to help calculate the level of coverage you may need legalandgeneral.com/insurance/life-insurance/life-insurance-calculator
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