Statistics show that one in five people will die before the age of 65. It’s a worrying figure and something that most of us would rather not think about, but failure to invest in life assurance could have disastrous consequences for your family.

Those who die in middle age could leave their dependants facing a very hard future unless they make adequate plans. Despite this, many families have little or no life assurance cover. Swiss Re, the reinsurance company, says that there is a £2,300 billion life assurance gap.

One factor in the growing trend of underinsurance is a lack of salesmen. Jon Briggs, head of protection research at Hargreaves Lansdown, the independent financial adviser, says: “Fewer people are selling life assurance these days. As life cover has become cheaper — premiums have fallen by about 30 per cent over the past 12 years — so the commission paid to advisers who sell policies has also decreased. They are, therefore, focusing on more lucrative types of business, such as pensions.”

The lack of salesmen for life assurance has, to a certain extent, been made up by an increase in direct sellers, such as the high street stores Marks & Spencer, Sainsbury and Tesco, but these companies do not provide any advice about how much cover customers actually need.

The first time that many people think about life insurance is when they buy a home. Taking out enough to cover the cost of the mortgage is fine, provided that you have no dependants. As soon as children come along, the situation is altered dramatically.

Mr Briggs says: “It is not enough to cover the mortgage, which will probably account for only about 20 per cent of the household expenses. How will your family manage to pay for the other 80 per cent?” One of the best ways to make sure that your family has a replacement income if you die is to take out “family income benefit” life assurance. These policies pay out a regular income, fixed or increasing in line with inflation, from the time you die until the end of the insurance policy’s term.

Despite the advantages of these policies — the income payments are tax-free — most people opt for lump-sum term assurance. Kevin Carr, head of protection strategy at Lifesearch, the specialist adviser, says: “Family income benefit is greatly undersold. You don’t hear much about it because banks, building societies, websites and supermarkets do not sell it.

“People like lump-sum cover because it sounds as though you receive a lot of money. Potentially, however, you can obtain more for your premiums with a family income benefit policy.”

Now that tax relief is given on premiums for lump-sum cover through pension term assurance, family income benefit is likely to become even more neglected, Mr Carr adds.

However, he points out that a 35-year-old man would pay about £12 a month after tax relief for £150,000 of pension term assurance over 25 years. For about the same cost, or less at Legal & General or Liverpool Victoria, he could take out a family income benefit policy for £10,000 a year over 25 years, which could pay total benefits of up to £250,000.

One of the problems when people take out lump-sum life assurance is that they tend to make an uneducated guess at the amount of cover that they require.

Mr Carr says: “They may think that £100,000 is enough, but if this amount is invested in a building society, it will produce an annual income of only about £5,000 at present which will be reduced to £4,000 after tax. The income will also fluctuate as interest rates go up and down.”

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