Almost two thirds of cash-strapped families have no insurance cover in place to pay out in the event of a parent dying.
The loss of a parent without appropriate life cover would add significantly to financial woes of families left behind, says the boss of debt advice charity Debt Support Trust
The trend, described by charity chief executive Stuart Carmichael as “very worrying”, emerged from a survey of 6,000 cases reviewed by the organisation. He added: “Living for today and failing to consider the consequences of tomorrow is becoming a growing issue. Life cover should be considered an essential expense to protect children in the event of parental loss.
“Not only could those left behind struggle to pay funeral expenses but everyday living expenses and commitments would be jeopardised because of a loss of the departed person’s earning power.”
The charity, which provides advice throughout the UK, reports a staggering 61% of families who are in debt and with one dependent child or more contacting the advice agency have made no provision for life insurance cover.
Stuart Carmichael cites the primary reason for failing to have a policy in place was down to not having enough money to afford the plan. The remaining 39% of families who were facing financial difficulties but were covered were paying an average of just over £1 a day – with the average policy of £37.68 per month which potentially could generate a payout of up to £328,000* based on a 20 year term policy for a 45-year-old male.
According to the charity, a similar worrying trend exists for home insurance with 30% of people in debt deciding their insurance for their property was an expense they couldn’t afford. Of the 70% continuing to pay for home insurance the average monthly premium was £31.62.
Stuart Carmichael said his advisors stress to those who call them that life insurance cover should be considered an “essential expenditure” and added: “Life insurance for people in debt is vital especially for those people who have children, even if they are struggling with debts. If the worst were to happen it’s imperative the children are financially secure and life insurance can help make that a reality.
“A life insurance premium considered to be an acceptable expenditure in any debt solution when there are children in the household. For this reason, we would always encourage people to seek financial advice from an insurance specialist. Even if someone is declared bankrupt, the trustee in bankruptcy would allow a life insurance premium commitment to continue.”
*Payout figure quoted provided by ER Network financial planning team.