Cost of life insurance gap equates to over £59,000 each

The nation is facing a huge life insurance protection gap of £2.3 trillion, which, according to Sainsbury’s Bank, if spread across those aged 18 – 64, for example, would equal on average over £59,000 each.

While there may be a number of factors fuelling the growth of this gap, such as the demise of the endowment and the fact that many people are taking on more debt without adjusting their life insurance policies, the Bank believes many people are not accurately calculating their 'true worth'.

When calculating the amount of life insurance required, Sainsbury’s Bank suspects that people may underestimate how much cover they will need by forgetting to put a financial value on their unpaid work. Sainsbury's Bank advises people to ensure they are looking at the whole picture when working out their life insurance needs.

Steve Johnson, Head of Life Insurance,Sainsbury’s Bank said: “When assessing the amount of life insurance you need, you should not only consider your debt and income, but also your dependants and the value of the unpaid work you do such as looking after the children and cooking and cleaning because paying for these would cost thousands of pounds a year.”

“The financial value of unpaid work in the home is often undervalued, especially when it comes to ensuring a family could cope financially if a parent died. Life insurance does not have to be expensive. Indeed, ours start from as little as £5 a month and are among the most competitive available.”

The Bank estimates that during the course of a year, the total sum of an average woman’s income from employment and the value of her unpaid work is around £31,284.82 and the corresponding figure for a man is around £33,321.95. Men on average earn £8,892 more than women but the value of their unpaid work is around £6,854.87 less. Men do over 880 hours a year of unpaid work and women do around 1,680.

Despite this, as many as 3.29 million families with dependent children do not have life insurance cover. Global reinsurer Swiss Re estimates that there is a shortfall in the amount of cover in place of well over £2 trillion.