What’s more important to you – insuring your life or your mobile phone? A new survey has found that that access to a mobile and to broadband was significantly more important in this day and age then making sure your family was protected in the event of your death.
More people care about insuring their phone than their life image
The news comes after a separate research found that those people with life insurance were generally underinsured to the tune of over £30,000. Keep reading to find out more.
Fewer than one in three people think life insurance is a necessity
Broadband and mobile phones are much more of a priority than life and critical illness insurance. That’s the conclusion of a new report from a leading insurer which revealed fewer than one in three people thought protecting their family as a necessity.
The latest Protection Report from Scottish Widows found that four in five people consider broadband an essential for daily living, while 71 per cent can’t get by without a mobile phone. In contrast, only 28 per cent of us felt that protecting our families in case we become critically ill or unable to work was a necessity.
Esther Dijkstra, head of protection at Scottish Widows, said that borrowers are now under greater scrutiny as a result of the Mortgage Market Review, which should mean that we all reassess our financial priorities. “Yet more people pay attention to making sure their possessions are insured than their own lives,” she added.
The survey also revealed that almost a quarter of the people didn’t know how long they would be able to keep up their mortgage repayments if they lost a significant chunk of their income. Those that did respond thought they would run out of money within five months.
The problem is most apparent in younger homeowners. Just over one in three (35 per cent) of 25- to 34-year-olds have a mortgage, but only 5 per cent have taken out an income protection policy and just 10 per cent have critical illness protection.
Those who have life insurance may be woefully underinsured
While the number of people who have taken out some form of protection may already be low, separate research has found that even those people with cover may be hugely underinsured.
Insurer SunLife has found that the average life insurance payout is £51,500 but the average outstanding mortgage is £83,000. As a result, bereaved families would be left with a £31,500 shortfall.
Many people take out life insurance in order to ensure that their mortgage would be repaid in the event of their death, leaving their family the security of owning their home. However, this shortfall could leave many millions of families in financial difficulty.
Dean Lamble, managing director at SunLife, pointed out that just eliminating that shortfall may not actually be enough.
He explained: “If for example the breadwinner in a family was to die, being able to pay off the mortgage would be a big help. But, while that would take a significant burden off the family, it wouldn’t leave any money to pay the ongoing household bills, provide an income or mean the everyday things could carry on.”
SunLife’s research confirms that many people don’t take care to work out exactly how much cover they need and err on the side of caution, choosing an insufficient amount of protection.
Gwilym Pugh from im-insured.co.uk said: “When working out the amount of life insurance you need you should firstly factor in any debts you have including your mortgage and any unsecured debts such as credit cards or loans.
“You should then work out how much cash your family will need to cover their ongoing living costs, perhaps until your children leave home.
“It’s also worth remembering that life insurance does not have to be hugely expensive. A young non-smoker can easily arrange £100,000 of cover for less than £10 per month – the fraction of the cost of broadband or a mobile phone contract.”