Homebuyers who take the life insurance deal offered to them by their mortgage lender could be paying 50% more for the same life cover than they need to and in some cases will be pushed towards taking even more expensive options.
Research carried out by comparison website Money-minder.com suggests that life insurance and mortgage protection being sold by the country's biggest mortgage lenders rarely offers the best value and in some cases could be costing home buyers a packet.
Using one typical example the difference between the most expensive cover offered and the cover available direct was £25.74 per month or a staggering £9266.40 over the term of the policy
Researchers approached the biggest mortgage lenders for joint life insurance quotes to cover a mortgage. The cover requested was for mortgage protection cover (decreasing term assurance) of £200,000 for a 30-year term.
The typical male and female couple were non-smokers aged 35 and 30 respectively in low risk occupations. The cover did not include additional critical illness cover or waiver of premium cover and all premiums were guaranteed to remain the same throughout the term of the policy.
Ray Black of Money-minder.com says, 'When you are applying for a mortgage the lender's adviser or broker will generally also try to sell you some life insurance to cover your mortgage. It is sensible to protect your partner or family in this way but rarely a good idea to blithely accept the first policy they offer without shopping around first. Our research has shown that a mortgage customer could be offered cover costing a lot more than they could find by comparing a range of insurers. A difference of £20 per month could add up to a saving of over £8000 over 30 years."