A new report has laid bare the scale of underprotection in the UK, revealing that half of all homeowners in the UK have no life insurance, while less than one in five and one in ten respectively have either critical illness or life insurance policies in force.
The Scottish Widows study, based on research carried out by YouGov among 5,221 adults, found that mortgage holders represented the bulk of protection customers, accounting for 75 per cent of critical illness and 69 per cent of income protection policies in force.
However, only 50 per cent of this group had any life cover, while just 17 per cent had a CI policy and 7 per cent an IP policy.
The results echo a separate YouGov study carried out on behalf of Friends Life in the first quarter of this year, which revealed of 2,031 people surveyed only 4 per cent have income protection, 7 per cent have critical illness cover and 23 per cent have life insurance.
Scottish Widows claimed the improvement in the housing market could be contributing to the protection insouciance among homeowners, as it is making them generally more confident in their overall circumstances and less likely to engage with the products.
However, with banks and others reporting affordability issues in the current economic climate, the form warned there is a risk of further difficulties if the historically low Bank of England base interest rate of 0.5 per cent begins to rise.
It also emphasised that beyond those with a home loan some groups are even more vulnerable, especially those renting privately as just 15 per cent have life cover, 5 per cent have critical illness and 3 per cent have income protection.
It added that as many as 29 per cent of renters state they have no savings whatsoever and in general significantly less hold a pension, Isa, or other investment compared to those with a mortgage. A further 31 per cent said any savings would last just three months at the most if they were unable to work.
Currently almost 8 million UK adults rent privately in the UK and with house prices rising and tougher mortgage application rules, this number is expected to increase.
Richard Jones,Protection Director at Scottish Widows said: “Those renting have the most to lose as they have the least savings and therefore the least resilience, and any lump sum saving could be lost to living costs if the unforeseen were to happen.
“Those in private rented accommodation, more than any other group, have a real protection need and insurers must work hard to demonstrate that financial protection is about protecting their family life and home whether they own it or not.”
While 58 per cent of people polled by Scottish Widows believe their employer will pay them either a full salary or a full salary followed by a partial salary if they are off work for a long term, this percentage rises to 64 per cent among mortgage holders.
Data from Swiss Re’s 2013 insurance report revealed that 81 per cent of people also believe employers have a role to play in offering some kind of protection.
This has led to the the likes of Canada Life calling on the government to introduce auto-enrolment semi-compulsion for protection cover, to force the hand of those that do not see the value in the products and prevent them falling back on the state.
Additional reporting by Donia O’Loughlin
