Nearly one in five households in England are in the private rented sector, with this proportion doubling since 2002. But, although their homes are at stake if they are unable to pay the rent due to illness or the death of the breadwinner, protection remains a rarity among renters.
Research by Sainsbury’s Bank found that while 41 per cent of homeowners have life insurance or critical illness cover, just 26 per cent of those renting have a policy. Richard Walsh, fellow at Sami Consulting and co-chair of the Building Resilient Households Group, says the situation is similarly problematic for income protection.
“Anecdotal evidence suggests that only around 6.5 per cent of income protection policyholders are in rented accommodation,” he explains. “This leaves many households dependent on their savings if they are unable to work due to long-term illness.”
In need of a safety net
Universal credit is available to individuals unable to pay the rent themselves due to illness or the death of a partner. However, as the amount someone receives is determined by their income and savings, how many people they live with and the Local Housing Allowance rate, there is no guarantee the benefit will cover the rent.
Just how unlikely this is was illustrated by research by Shelter. Based on analysis of government figures, it found that as a result of private rents rising faster than the LHA rate, shortfalls are commonplace. The biggest is in Kensington and Chelsea, where a small family with one or two children would be expected to find an additional £1,253 a month, but even outside the capital they could still be looking at an extra £531 of housing costs every month.
Adding further weight to the need for protection, a recent report from letting platform Howsy demonstrates how dependent renters are on their income. It found that, on average, 34 per cent of the average salary is spent on rent in the UK, with this figure climbing to 65 per cent for those renting in the capital. Hackney takes top spot, with tenants in the borough spending an average of 83 per cent of their salary on rent.
Given that the English Housing Survey found owner-occupiers spent an average of 19 per cent of their income on mortgage payments, there is clearly a pressing need for renters to consider protection. As well as a potentially larger liability, private landlords may not be quite so sympathetic as lenders when it comes to negotiating a mortgage holiday.
Breaking down barriers
Although their homes are potentially more at risk in the event of long-term illness or death, it is easy to see why renters are failing to take out protection: with most protection sold on the back of a mortgage, they are simply not exposed to the protection conversation.
Ben Heffer, insight consultant for life and protection at Defaqto, says: “Renters tend to fall through the gaps a bit. A significant number of people rent their homes but the focus for financial needs tends to be on the mortgage.”
The situation is exacerbated by the language used in protection literature, where the importance of protecting the home and mortgage is a common message. Although these policies are just as suitable for someone in private rented accommodation, this bias is serving to exclude them.