Four in ten with young children don’t have life insurance

Four in ten parents with children at home (39%) don’t have life insurance, according to new research from Compare the Market. The research, based on a survey of parents with children under the age of 18, shows that nine in ten (90%) worry about how their children will cope financially if they die before their children reach adulthood.

Figures from the Childhood Bereavement Network estimate that 26,900 parents die each year leaving dependent children. This means, on average, a parent dies every 20 minutes.

However, only three in five (61%) parents have some form of life insurance. Almost half (48%) of parents have a life insurance policy and a fifth (21%) have life insurance from their employer, such as death-in-service benefits – only 8% have both.

When it comes to parents with mortgages, over half (53%) owe more than £100,000 with an average mortgage debt of £145,720. Homes with mortgages can be repossessed by lenders if a parent dies with outstanding debt and partners, next of kin or beneficiaries can’t cover the payments, making it a concern for parents without life insurance to leave behind.

Seven in ten parents (70%) also have other outstanding credit card or loan debts, owing an average of £5,115. If a parent has unsecured debt when they die, these are paid from their estate, which could limit how much inheritance their partner or children will receive. 

More than four in ten parents with a partner (42%) believe their other half wouldn’t be able to afford their mortgage or rental payments on a single income. Half of parents (50%) also expect their partners wouldn’t be able to pay their household bills for more than two months using their existing savings.

The research found 61% of parents believe they wouldn’t be able to afford their regular bills for more than three months if they were unable to work due to a serious illness. However, only one in three (33%) have an income protection policy and four in ten have critical illness cover (42%).

Amongst those parents with life insurance, many may be overpaying for their cover if they haven’t shopped around or checked their policy is fit for their current situation. The research shows 47% of parents haven’t reviewed their policy in the past five years and 37% don’t know how much their policy will pay out if they die. Over a quarter (28%) bought their policy directly from an insurer, without shopping around first, potentially missing out on a better deal.

Tom Lyon, Director at Compare the Market, said “Most parents worry about protecting their children and securing their future. Life insurance could at least offer some reassurance, by providing financial protection. Typically, life insurance pays out a lump sum in the event of a policyholder’s demise, which could cover things like the mortgage, outstanding debts, or regular bills. It could also be used for future expenses, giving children some financial security and a single parent, for example, breathing space to adjust to a very difficult new reality.”