Protection CPD Course  

How can advisers help to close protection gap for renters?

This article is part of
Guide to innovation in protection

How can advisers help to close protection gap for renters?
Credit: Karolina Grabowska via Pexels

The protection gap is often spoken about in relation to young renters, but it has also become a big issue with older renters.

Individuals over the age of 55 now account for 16 per cent (576,0000) of privately rented households in England, up from 11 per cent in 2010 according to a study by Paragon Bank.

The increase has been attributed to more later-life divorces, poorer pensions and increases in life expectancy.

The pandemic has also caused many to suffer financial loss as people are faced with the difficult decision of being forced to choose between paying for food and bills or paying rent.

The industry’s ability to reach the renter community has always been a problem. Data suggests that the main trigger for people to discuss protection insurances is a significant life event; such as having a child or, most pertinently, buying a house.

Therefore, the renter community often gets widely ignored by the insurance sector. 

Matthew Chapman, commercial director at Plus Financial Group, says the advent of products specifically tailored to renters is encouraging. However, he says more work needs to be done to create awareness of the importance of protection to this financially vulnerable segment of the market. 

Chapman adds: “I have been suggesting that we look to signpost the need for lifestyle insurances, such as income protection, within the tenancy agreement given the benefit and financial security this could offer the tenant, the letting agent and the landlord alike. 

“More work needs to be done to engage letting agents and tenants to explore these types of financial resilience solutions.”

Income loss

Income protection cover is essential for renters, especially when taking into account the relatively low level of savings they have in place. 

David Mead, founder of Future Proof and joint head of protection at St. James's Place Protection Planning, says: “What happens if they become sick and need to take extended time off work? How long will their employment benefits help them to keep the wolf from the door? 

“If the events of the last 12 months have taught us anything, it’s that we are all a lot more vulnerable than we thought we were. Income protection will keep the cash flowing when the income stops.”

Ian McKenna, founder of FTRC and Protection Guru, agrees. He says: “The rental sector is an enormous opportunity for the income protection market, It can be argued that people in rented accommodation need cover even more than those who are in their own home.

“Most renters enter into a 12-month contract, but employers only have to provide statutory sick pay for 28 weeks and in reality, this will rarely be enough to cover rental costs as the average rental household spends 41 per cent of its income on rent.