30th January 2015
Millions of homeowners are leaving themselves financially vulnerable by failing to have insurance in place to cover their mortgage payments in case they can’t work.
Research by insurer Royal London and charity Seven Families, has found over half of mortgage holders who earn an income have no plan in place to cover their repayments if they become too ill to work, equalling 5.2 million people. Of those, 1.8 million have not given this circumstance any thought.
These figures come despite one in four knowing someone who has struggled to afford a mortgage due to illness.
There is a lack of understanding of just how long homeowners could survive without a regular wage coming in, with 2.6 million not knowing how long they could survive financially. Half estimated it would be six months or less.
In terms of coping with a reduced household income, 59% said they would reduce household expenses, 51% said they would use savings and 46% would rely on the earnings of someone else on the household. Just over a third would rely on state benefits.
When questioned about who they would turn to for financial advice if they became ill, 36% would consult friends or family but one in five said they would not seek advice. The majority, 56%, said they would turn to a charity or government body, while a minority of 15% said they would consult a financial advice.
Debbie Kennedy, head of protection proposition for Royal London’s intermediary division, said the report ‘shines a light on an important issue; how people would cope financially if they faced serious illness or disability, and become too ill to earn money to cover financial commitments like their mortgage’.
‘Our research highlights how many UK mortgage-holders are in a vulnerable position – unsure how they’d cope financially and who they would turn to for financial advice,’ she said.
‘We urge mortgage holders who earn their income to consider how they would cope if they became too ill to earn.’