L&G’s "The millennial life insurance gap" report from 2019 found that "a married couple with at least one child is 2.4 times more likely to have life insurance if they have a mortgage rather than rent". This should not be the case however, as the potential outcome is the same – losing the family home.
A loss of earnings due to death would put a greater burden on the survivor to meet the rental costs – which as we know have risen considerably over recent years and are often higher than a monthly mortgage cost – in the same way for the survivor with a mortgage.
To me, this shows that without the physical asset that is potentially lost, it can be hard for people to foresee the benefit of having cover in place. It may also be that they have not spoken to a mortgage adviser and taken out a policy either.
I think we need to reframe the conversations and perceptions in such scenarios. It is not about the house being paid off, it is about the family being able to maintain where they are living.
In the above scenario (renting versus ownership), to me it is not a one-size-fits-all product that covers this.
For the renter, family income benefit (offering a monthly income), given the monthly rental cost, could be an option. Or they might want to take out a term assurance policy (paying a lump sum) to allow the family to purchase a home of their own.
These are the conversations to be had by advisers/planners/brokers to ensure appropriate products are put in place for clients, based on their individual circumstances.
When clients understand that such a product meets their circumstances, I personally think they would see much more value in the protection policy.
While it is great that people are covering their potential mortgage liability should they pass away, we need to ensure that people understand the risks in other scenarios and are in a position to make informed decisions.
In the same L&G report, looking at the reasons millennials do not have life insurance:
- 41 per cent said it is a lower priority than other expenses;
- 38 per cent said they do not want the extra expense; and
- 31 per cent said they have never even thought about it.
In my opinion, this shows we need to change the way insurance is thought about and the understanding of not just life insurance, but all financial protection products.
Pleasingly, two separate studies this year (by Opinium for National Friendly and Eleos) both pointed to the growing trend that young adults are increasingly taking out income protection policies.
