Your clients need your help

More than half of UK adults say they have life insurance – but a large chunk of that protection is tied to their job and may be nowhere near enough to clear the average new mortgage.

For brokers, that gap is a growing concern – and a sizeable opportunity to do the right thing by clients.

A  Post Office survey found 53% of people in the UK have some form of life cover. For many employed borrowers, that cover takes the form of a workplace “death in service” benefit, typically worth two to four times their annual salary.

Set against today’s housing market, that doesn’t stretch very far. With the average new UK mortgage now standing at £225,672, Post Office Life Insurance warns that many households are leaning on a benefit that may not even clear the home loan, let alone other costs.

Depending on salary, the average payout from workplace life insurance falls somewhere between £76,200 and £152,400. That leaves a potential shortfall of up to £150,000 against the mortgage alone – before you factor in childcare, energy bills, council tax, car finance or funeral expenses.

“Workplace life insurance is a valuable benefit, but it’s not always enough,” says Paul Paddock, CEO of Post Office Insurance. “With the average mortgage now exceeding many workplace policy payouts, families could face financial strain during an already emotional time. We encourage people to review their workplace policy regularly and consider whether additional protection is needed to cover mortgages, dependents, and other financial commitments.”

Why death-in-service isn’t built for mortgages

From an HR point of view, death-in-service is simple and relatively cheap to provide. From a broker’s perspective, it is a blunt instrument.

Typical features include:

• The payout is linked to salary, not to a family’s actual liabilities.
• Cover usually only applies to permanent employees on payroll; contractors, freelancers, zero-hours staff and some part-timers may not be covered at all.
• New or fixed-term staff may have to complete probation before they are eligible.
• Terminal illness benefits usually only apply while the employee is still in service.

Crucially, the policy belongs to the employer, not the individual. If a client changes jobs, becomes self-employed, is made redundant or has their hours reduced, their workplace benefit can disappear overnight – at exactly the time when their finances may already be under pressure.

That makes death-in-service a useful bonus, but a shaky foundation for long-term mortgage planning.

For brokers, it’s not hard to translate these numbers into real-life risk.

Take a client on a £40,000 salary with a new mortgage of £225,000. A typical three-times-salary death-in-service benefit would pay £120,000 – just over half the mortgage balance. If that client dies unexpectedly, a surviving partner could still be left with more than £100,000 of debt to clear, plus everyday bills.

Add in children, rising living costs and the possibility that the surviving partner may need to reduce working hours, and the gap widens further.

Even higher earners can be exposed. Someone on £60,000 with four-times-salary cover would receive a £240,000 payout – enough to repay the mortgage in theory, but only if every penny goes to the lender and none is used to keep the household running.

Against this backdrop, it is easy to see why protection specialists talk about a “mortgage protection gap” – and why the broker community is increasingly seen as the first line of defence.

For many borrowers, the only time anyone sits down with them to talk about life cover in the context of their mortgage is in a broker’s office or on a broker’s video call. That gives advisers a unique chance to join the dots between debt, dependants and existing cover.

There are several natural trigger points:

• First-time buyers who have never reviewed their protection properly.
• Home movers increasing their borrowing.
• Remortgage customers rolling debts and higher rates into a new deal.
• Clients whose family circumstances have changed since they last took out cover – new children, divorce, or caring responsibilities for older relatives.

A structured protection conversation can help clients map:

– what workplace life cover they actually have
– how long it would last if their family tried to service the mortgage and bills from the lump sum
– what would happen if they changed jobs or became self-employed.

That then opens the door to tailored solutions such as level term insurance to cover an interest-only mortgage, or decreasing term cover aligned to a repayment mortgage. For some households, a mix of mortgage-specific cover and family income benefit may make more sense than a single lump sum.

Far from being a hard sell, many brokers report that once clients see the numbers in black and white, they are surprised they have never been shown the shortfall before.

Consumer Duty and good-outcome thinking

Regulation is also nudging the market in this direction. Under Consumer Duty, firms are expected to deliver good outcomes, not just suitable products on paper. For mortgage intermediaries, that increasingly means thinking beyond the rate and term to ask what happens if the worst occurs.

A broker who documents a clear discussion about life cover – including an explanation of why workplace benefits may not be enough – will be in a stronger position than one who assumes “work have it sorted” and moves on.

That doesn’t mean every client must be sold a policy. Some may have substantial personal cover already, or enough assets to repay the loan. But the expectation that the conversation should happen is only likely to increase.

Turning a risk into a business opportunity

From a commercial perspective, protection is also a way to diversify income at a time when pure mortgage margins are under pressure.

Advisers who integrate protection into their process often find it deepens relationships, increases client retention and generates referrals. When a claim does occur – and most firms have at least one story of a life, critical illness or income protection payout – it can be the moment that cements the broker’s reputation with an entire family.

The key is positioning. Rather than treating life cover as “add-on insurance”, the most successful brokers frame it as part of the mortgage itself: if the loan will still be there after a client dies, something has to pay it off. If death-in-service only gets them part-way, that “something” needs to be a personal policy.

Time for brokers to challenge the workplace myth

The UK’s reliance on workplace life insurance has created a comforting myth: that if you’re employed and have a death-in-service benefit, you’re protected.

In reality, the numbers tell a different story. With the average new mortgage nudging a quarter of a million pounds, many borrowers are carrying far more debt than their employer benefit would clear – and they may lose that benefit altogether long before the mortgage ends.

For mortgage brokers, that myth is both a risk and a mandate. Clients may assume “I’m covered through work”; advisers have the data and the duty to show them whether that’s truly the case.

As living costs rise and household budgets tighten, it can be tempting for borrowers to cut corners on protection. But when the potential shortfall runs into six figures, a properly structured life policy can be the difference between a family keeping its home or being forced to sell at the worst possible moment.

The life insurance market is vast, products are flexible and pricing remains competitive. The real challenge – and opportunity – lies in making sure every mortgage conversation includes one simple question: if your workplace benefit disappeared tomorrow, who would pay off your home?