Research has revealed the insurance black hole is widening with an estimated 26 per cent of employees with dependents without life insurance.
Price comparison website Moneysupermarket said this meant the families of 8.5m people were at risk in the event of serious injury or death to the main breadwinner.
With the average life insurance payout in the region of £31,000, this equates to a £263bn black hole in life insurance provision for dependents who do not have a policy in place.
The research, which surveyed 2,004 adults in December, revealed 12 million UK workers were women – of which 38 per cent have life insurance, compared to 45 per cent of males.
Kevin Pratt, an insurance expert at Moneysupermarket, said: “Anyone with a partner or children who are financially reliant on them should think about life insurance. Avoiding the matter can put loved ones at grave financial risk and it’s worrying to see how many breadwinners – male and female – are doing this.”
Public sector workers were least likely to have cover, according to the study, with only 42 per cent in the health and education sector with a life insurance policy.
In contrast, 61 per cent of workers in the major private sector industries – the professional and financial services – were covered.
Those working in manufacturing were most likely to have life insurance, at 69 per cent, while 58 per cent of construction workers had protection.
ABI figures have shown 10.8m households are at risk of their income falling by at least a third if the main earner should stop working.
Myles Rix, LV’s managing director of protection, said very few have a financial contingency plan, such as income protection, which would enable them to focus on recovering without the additional stress of paying the bills.
Damian O’Connor, director of Hampshire-based Roxburgh Financial Management, said: “Life insurance, most people’s first choice, may not be the right option when compared to income protection or critical illness cover, so that is where an adviser can really add value and help show clients that it is arguably the most essential part of the financial planning process.”
Jeremy Edwards, financial adviser at Leicestershire-based Bankfield Financial Advisers, said: “Income protection is probably one of the most important and useful policies to have, but getting people to buy it is another thing. I would like to see employer and trade unions encouraging staff to take out a policy.”
In September, global consultancy firm KPMG International, said the insurance sector was failing to innovate and was struggling to plug the protection gap.
Mary Trussell, a partner at KPMG, warned the lack of innovation was the single largest factor affecting the industry across Europe and the UK, and this was having a knock-on effect on providing advisers and their clients with the products they needed.