Homeowners waste millions buying mortgage lender’s life cover

Financially stretched homeowners could be overpaying by GBP 310 million every year by taking out life insurance with their mortgage provider, which many mistakenly believe is compulsory.

A study by the Post Office reveals that over a third (34 per cent) of people completing a mortgage application bought life insurance through their mortgage provider, which could be costing them an additional GBP 2000 each.

Confusion appears to be the main reason for people choosing to take out life insurance this way; 35 per cent said they felt pressured into buying it, or believed it was compulsory to purchase life insurance with the same provider.

Over half (54 per cent) of respondents said it was simply more convenient to arrange their life insurance and mortgage together, despite the fact they could be wasting hundreds of pounds by failing to shop around.

Worryingly, it seems many people are actually aware they are not getting the best deal, as only 16 per cent said that their mortgage provider offered the best value on life insurance.