Health and The Insurance

Archive for the ‘Life Insurance’ Category

Life insurance and life assurance may be interlinked in advertisements, though bear in mind the two policies are different. Life insurance on the other hand is simply financial protection for your family, avoiding the issue of debt in the event of your death. According to an article by the Fair Investment Company, the British life insurance industry shrank to almost half the size of the pensions industry last year and according to the Association of British Insurers, less than 50% of UK households hold a life insurance policy.

In their most recent newsletter about this issue, the Association of British Insurers found that 25% of mortgage holders had insufficient life insurance to cover their debt. The ratio of new life insurance policies to new mortgage loans was apparently 68% in 1994, but by 2004 this had dropped by half to 33%. The absence of mortgage life coverage poses a serious risk for the dependants of homeowners. If banks were to embark on wide scale repossessions as a result of this absence of life insurance, this would impose a risk on their loan books and reputations.

Reasons for the downward trend in life insurance take-up include:

1.      Relaxation in lending policy ‘ increased competition in the mortgage market means that lenders are not forcing life insurance policies on their customers

2.      High house prices have stretched homebuyers, in particular first time home-buyers, in terms of their mortgage repayments, that the additional costs of a life insurance policy are deemed too expensive

3.      There are more households with no dependents

Because of the various factors listed above, people have also become less familiar with the term life insurance and without the awareness there is little recognition of the importance of this type of insurance. However as speculation increases that UK households are not coping with their debt, so should the awareness of life insurance as an essential product in the personal finance portfolio.