Protection  

Income warning for millions of renters

Income warning for millions of renters
 Photo: Pexels

Britain's renters need to make sure they can keep paying the bills should they become too ill to work, an insurance giant has warned.

Legal & General suggested that with a significant proportion of the workforce living in rented accommodation, it was vital that they protected their income through policies such as income protection, in case they became too ill to work, or had an accident that saw them unable to work for a protracted period.

Craig Brown, director for intermediary insurance at Legal & General, said: "Our ‘Deadline to Breadline’ 2020 research, which looks at how long people believe they could survive financially if they lost their income, revealed renters are especially vulnerable to any financial instability.

"It found that the average private renter thinks they could last for 30 days if they lost their income, but in reality they are only three days from the ‘breadline’ compared to 23 days for the average mortgage holder."

The warning came as the latest research by estate and lettings agent Barrows and Forrester revealed an alarming increase in the level of rental arrears during the Covid-19 pandemic.

During wave one of the pandemic restrictions, figures from the ONS estimated 7 per cent of the 4.8m private rented households in England were at least one month behind on their rent payments - equating to some 335,860 homes.

But during wave two of the pandemic, the number of households in at least one month’s arrears rose to 9 per cent, which means wave two saw some 431,820 private rental households fall into arrears, to the tune or more than £365.3m.

The average cost of renting was also higher during wave two than during wave one, rising from £826 to £846 per month, while inflation has risen steadily, feeding through to higher prices at the checkout.

Add to this the rising cost of energy - which has already seen the UK's sixth-largest energy supplier, Bulb, seeking a bailout in order to remain in business, and it is clear the pandemic is having a material, financial effect on Britain's renters.

Should renters lose their employment and not have any accident, sickness and unemployment cover, the financial impact could hit hard, although - as reported by FTAdviser last year - many insurers offering ASU pulled the 'unemployment' element from policies amid fears the pandemic would lead to mass redundancies. 

According to Brown, the problem would be compounded should the individual become sick and unable to pay their bills. 

He added: "Mortgage holders are seven times more likely to protect their income than renters, with only 2 per cent of renters having an income protection policy compared to 14 per cent of those with a mortgage.

"So renters need to be protected and there is an under-served market out there for advisers to address.”