With 53% of people in the UK having life insurance, according to a Post Office survey in 2022, experts are revealing they can often fall short of covering the average new mortgage, potentially leaving people financially exposed.
A workplace policy, which is offered as part of a benefits package, commonly known as ‘death in service’, typically pays out between two to four times the annual salary. However, with the average new UK mortgage now standing at £225,672, Post Office Life Insurance are highlighting that many workers could be relying on cover that doesn’t meet their financial needs.
The average payout from workplace life insurance ranges from £76,200 to £152,400, meaning a potential shortfall of up to £150,000 when compared to the average mortgage alone, not including other financial commitments such as childcare, household bills, or funeral costs.
To help people understand their cover, Post Office Life Insurance have shared what these policies typically include, who might not be covered, and when additional insurance should be considered.
What workplace life insurance typically covers
Workplace life insurance is provided at no cost to employees and is generally unaffected by pre-existing medical conditions. However, there are limits:
· The payout is typically a multiple of your salary rather than a chosen amount.
· Cover is usually limited to employees on payroll; contractors, freelancers, zero-hours, or part-time workers may not be included.
· New or fixed-term employees might need to complete a probationary period before they are eligible.
· Terminal illness cover usually only applies if you are still employed at the time of diagnosis or death.
Situations where extra life cover may be necessary
Financial commitments: Mortgages, debts, childcare, and funeral costs may exceed your policy payout. For example, the average UK mortgage as of the first quarter of 2025 is £225,672, sometimes above what a standard workplace policy typically covers.
· Dependents: If others rely on your income, consider whether the standard multiple of your salary is enough to support them financially.
· Job security: Workplace life insurance only covers you while employed. Those switching jobs, self-employed, or worried about role stability may need extra protection.
· Life changes: Major life events like moving house, having children, or taking on new financial commitments may mean your existing cover no longer meets your needs.
“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.”
