Renting for the long-term has become more common in recent years and this means there are a range of new things for tenants to consider. Gone are the days when renting was just for the short-term while saving up to buy a property. These days, an average tenant could be anyone from a middle-aged renter to retired pensioner or parents with dependent children. For example, the latest English Housing Survey shows the average age of a private renter as 40 years-old, while the proportion of 55-64-year-olds privately renting almost doubled between 2007-08 and 2017-18. Meanwhile, couples with dependent children make up almost a quarter of households in the Private Rental Sector (PRS).
Private renters live in rental accommodation for an average of 4.1 years, with older renters tending to live in rental homes longer than their younger counterparts. One of the issues raised by people renting for longer is the formation of what is known as a 'protection gap' when it comes to people taking out life insurance.
What is the protection gap?
When people rent, life insurance is unlikely to be something they consider taking out. That's because, as renting is traditionally associated with younger people, renters are not prompted to take out these important policies. However, as the average age of tenants increases and a wider demographic of people live in the rental sector, this poses a problem. A protection gap starts to form where the people who need to be taking out life insurance aren't doing so.
When property buyers take out a mortgage, there is usually a trigger to also take out life insurance or similar policies. There is nothing similar in place in the rental sector, so as private renting becomes more popular with people of all ages and personal circumstances, the protection gap is set to keep on growing. Recent research by Sainsbury's Bank clearly illustrates the problem. Its survey found that just 26% of tenants are likely to have a life insurance or critical illness policy in place, compared to 41% of owner-occupiers.
What's more, tenants are more concerned than homeowners about the financial implications of passing away before old age, despite being less likely to have the required policies in place.
Finally, 21% of renters said they worry about not having life insurance and the potential problems it could cause on a weekly basis, compared to only 16% of homeowners.
It's evident that tenants are becoming more aware of life insurance and why they need it but because of the reasons above, it's likely they won't have the same access and convenience provided to homeowners.
Why is life insurance so important?
For many tenants, life insurance may not yet be a key consideration, but as we can see from the data above, PRS growth means it is becoming increasingly relevant for renters.
Life insurance, which could cost a few pence a day or take the form of a monthly payment, can provide for your family or dependents in the event that you pass away. It can be paid out as a lump sum or in regular payments and is designed to cover living costs, including rent payments. There are generally two types of life insurance - term life policies and whole-of-life policies. The former covers you for a fixed period of time, while the latter will mean you're protected no matter when you die.
The cost of your life insurance will depend on a number of factors, including your age, lifestyle, general health, whether you smoke and the length of the policy you are looking to take out. Life insurance is not always an easy thing to think about, but it's hugely important to futureproof the financial security of your loved ones in the event that you die unexpectedly. As well as providing financial cover in that event, life insurance gives you the peace of mind now that the necessary steps are in place for the future.
As a renter, you might not frequently be prompted to take out life insurance, but it is certainly something you should look into, particularly if you are older, have a family or people rely on your income.
What other types of insurance could tenants benefit from?
As well as life insurance, there are other types of insurance that can provide you with invaluable cover whilst you rent your home. There is Tenants Contents Insurance, which covers your belongings in the event that they are stolen or damaged. For example, if there is a flood or fire in your rental property, a contents insurance will cover the cost of replacing your possessions.
Our contents insurance provides you with cover for up to £50,000 as standard and there are also a range of add-ons you can choose, including accidental damage cover, unspecified personal belongings, personal legal protection and more.
The other type of insurance that is important for renters is Tenancy Liability Cover. This will cover the costs of replacing or repair for any of your landlord's possessions that are accidentally damaged during your tenancy which you could be liable for under your tenancy agreement.
This means if you accidentally break a sofa provided by your landlord, tenancy liability insurance can cover the cost of a replacement so you don't have to worry about footing the bill or losing valuable funds from your security deposit. Here at HomeLet, we offer Tenants Insurance which combines both contents and tenancy liability cover to give you the ultimate protection and peace of mind while renting a property.