By Toby Walne, Financial Mail on Sunday
21:51 03 Jun 2023, update 21:51 03 Jun 2023
Almost 13 million people in the UK do not have the right personal protection insurance cover, leaving them exposed to unexpected bills in the event of illness or death.
Exclusive research for The Mail on Sunday by insurer Legal & General found that 43% of adults have some form of personal protection insurance, such as life, critical illness or income protection.
These policies pay an income or a lump sum 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 changed their insurance according to milestones such as getting married, buying a house, having children or divorcing.
For example, some policies pay off the mortgage if you become seriously ill or die. But policyholders often forget to increase the level of cover when they move and take on more mortgage debt, exposing them to a loss of income.
Two in five households surveyed said they would have to rely on their savings if their cover was insufficient – 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 in life insurance and income protection cover for policies held with insurer Aviva. The official took out the policies four years ago when buying 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 update his policies so that if anything happened to him there would be enough to pay off the £185,000 mortgage on their three-bedroom house and to support his young family.
Alex says: “Life is changing and we want to make sure the family is well taken care of should anything happen. Our son Hudson has autism, and it makes you reassess what matters in life. I want to leave them more, so plan to increase coverage – and pay a little more – for peace of mind.
Legal & General found that 12.9 million personal protection holders made no changes when they got married (19%), had children (19%), moved in (19%), or have been divorced or separated (15%). ).
Rebecca Harvey, 36, from Widford in Hertfordshire, moved into a £560,000 three-bedroom semi-detached house with her partner last year. She had previously lived alone in a £245,000 two-bedroom house in Harlow, Essex. When she moved, she updated her policy to cover the higher mortgage balance.
Rebecca, an accountant, says: “I was paying £17 a month for critical illness cover with Aviva. Moving in with someone is a commitment that got me thinking about the future – and we both want to be debt-free within a few decades so we can retire early.
HOW MONEY CAN HELP
“I will be paying £30 a month – almost double what I have paid before – to ensure cover is increased from £160,000 to £224,000. This means that if anything should happen, my part of the mortgage will be paid off.
Most people – 57% – do not have personal protection coverage. The most popular form of protection is life insurance, which is purchased by one in five people.
One in ten has critical illness coverage and a similar number has income protection insurance.
Legal & General is concerned about the serious lack of understanding of all types of protection insurance – and the amount of cover purchased.
Paula Llewellyn of Legal & General says: ‘It’s essential to have a safety net in place should the worst happen – but far too many people don’t have the right level of cover due to changed circumstances. It costs nothing to have this reviewed.
Not only can circumstances change, but policies vary widely. The Association of British Insurers trade body provides details of options, such as term, lifetime and critical illness plans. An independent financial adviser can also provide support. Local specialists can be found through the trade organization Unbiased.
Comparison websites such as MoneySupermarket, Compare The Market and Go Compare provide free quotes.
You should check the fine print to make sure you get what you pay for. For example, if you purchase critical illness cover, the injuries and illnesses included often differ from policy to policy.
Legal & General offers a free life insurance calculator to help you determine the level of cover you may need at legalandgeneral.com/insurance/life-insurance/life-insurance-calculator
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