Opinions and evidence vary.
One reputable study from 2019 estimated that some 40 per cent of people with a mortgage have no life insurance cover.
A slightly earlier analysis put the uncovered proportion of mortgage holders closer to 50 per cent.
In this short paper, we prefer to look at the issue on a household basis.
We have therefore taken the most conservative available statistic (26 per cent of mortgaged households) as the basis for modelling lack of life cover for mortgage holders across the nation.
Beagle Street commissioned analysis from independent research organisation MindMetre to model the current mortgaged home value-at-risk with mortgage holders who do not have life insurance cover.
Our study on this potential liability for homeowners should their partner die unexpectedly has been christened the ‘mortgage cover gap’.
The study combined official data on average house prices, mean mortgage penetration, average loan-to-value and the most conservative available intelligence on life insurance take-up to protect mortgage debt.
The resulting figures are shown in Table 1 below.
The figures total the mortgage debt estimate for each region of England, as well as for Wales and Scotland, that is not protected with life insurance. These totals are influenced by differing house prices, LTV rates, mortgage debt penetration, and so on.
| Area | Mortgage Cover Gap (£ million) |
| Great Britain | 433,027 |
| Wales | 16,102 |
| Scotland | 27,864 |
| London | 86,354 |
| South East | 81,963 |
| East of England | 50,668 |
| North West | 38,175 |
| South West | 36,392 |
| West Midlands | 32,076 |
| Yorkshire and the Humber | 26,909 |
| East Midlands | 25,650 |
Evidence, affordability and next steps for advisers
There is a strong argument to say that the industry should do even more to promote the affordability of life insurance, perhaps in collaboration with government, social scientists and large employers.
Typically, a young person with a family can expect to obtain life cover of £200,000+ for around £10 a month.
This is equivalent to taking on a less highly specified mobile phone contract or foregoing one visit to the cinema.
Ironically, the age group where the impact of a premature, uninsured death can be most devastating – families with young children – is often the least costly to insure.
The Financial Conduct Authority’s new consumer duty initiative may help to build further confidence in the life cover industry (especially perceptions of the reliability of claims) and in turn help promote take-up.
Similarly, the growing popularity of life cover offered by corporations as a perk of employment may also help move the dial.
Mark Mullaney is head of partnerships and distribution and Dan Brumhead is relationship manager - affinity partnership and distribution at Beagle Street
