04 Feb 2019 The ‘squeezed middle’ are spending £3.7bn on life insurance before having their policies cancelled by providers because they have fallen into financial difficulties, according to research by Co-op Insurance.
According to the findings, the average 30-60 year old in the UK had paid out £2,050 before their insurance was cancelled after holding policies for 8 years and 4 months paying £20.50 per month.
Only 48% of the ‘squeezed middle’ hold life insurance in the UK. Of those who have life insurance, nearly a third (31%) say they have struggled to pay for their life cover and, of these, two thirds (67%) have missed direct debit payments. This has led to over four fifths (87%) finding themselves in arrears.
78% of life insurance policyholders who found themselves in arrears had their policies cancelled by their insurer either automatically after the first missed payment or after a period of time.
Despite this, 87% of the ‘squeezed middle’ who have found themselves in financial difficulties have missed their own life insurance payments to pay relatives’ bills.
Over a quarter (27%) of the UK adults aged 30-60 with dependents are actually supporting their parents financially, with 78% supporting their children. Parents are depending on the children for the most money every month, an average of £235 whilst dependent children receive £177. Those who support both pay out an average of £186 per month.
Nearly half (49%) of UK adults aged 30-60 feel this is unfair and 80% want to see insurers doing more to help people who end up in arrears after paying for policies for often a prolonged period. Nearly two thirds (63%) think people should be treated on an individual basis and 58% want to see extended payment holiday periods.
Co-op Insurance has re-entered the life market and launched Co-op Life Cover alongside its partner Royal London which will offer a solution designed by Co-op Members, not widely offered in the market, to policyholders who may at times have periods of financial difficulty.
The product offers a level term, decreasing term or family income benefit and:
· Includes the option to take two six month payment holidays throughout the lifetime of the policy after a 12 month qualifying period, allowing their policy to remain in force
· Customers can also opt to reduce their cover level rather than pay back any shortfall at the end of the payment holiday window
Charles Offord, Director of Co-op Insurance, said: “There is a clear life insurance gap in the UK, especially for those who are foregoing payments or not taking out cover to support relatives with their day to day finances.
“It just isn’t right that billions of pounds in premiums are being paid by customers on time, every month, for their policies to be cancelled when finances are stretched. At the Co-op we are keen to fill this gap and appreciate that sometimes finances can be stretched and people have to prioritise what gets paid, and what doesn’t.
“All too often, life insurance is seen as the least important payment, when really nothing could be further from the truth if something bad happens. This is why we have created up to six month payment holidays, alongside our partner Royal London, to help policyholders out in their time of need. We’ll also allow customers to reduce their insured amount rather than pay back any shortfalls to further lessen the financial pressure.”