Shelley Read – Senior Protection Technical and Development Manager
Most people buy protection in some form whether it is life, income protection or critical illness cover when they buy a house*.
However, tenants haven’t yet been through this process so the majority have no cover at all¹. Admittedly they don’t have a large mortgage debt to protect but they do have a monthly commitment by way of rent to cover. What if a tenant gets seriously ill, or dies prematurely?
The rental market
Over the past few years, the estate agents’ windows where I live, and I’m sure it’s the same across the UK, have dramatically changed. Where they were historically full of properties for sale and just a few rentals, now it is at least half and half. Some businesses are just pure letting agents and only promote properties for rent.
And while some people are happy to rent in the long term, many people in our communities are renting by necessity and not by choice. They may need to wait to purchase a home until their earnings increase or until they have saved enough deposit to be considered for a mortgage.
If the worst happens
If your rental client became seriously ill, how would they continue to pay their rent? Those lucky enough to have sickness pay from their employer may be able to keep up their rental commitment. But for how long? It’s the tenants who have no employee benefits, particularly those who are self-employed, who are very much in need of the advice of a protection specialist.
Without any income these tenants may not be able to keep up their monthly rental commitments, maintain their current lifestyle and continue to save a deposit for their much-wanted own home. A bereaved family, having lost a main wage earner, might not be able to maintain their rental commitments and their lifestyle.
Family income benefit
A solution maybe to consider a family income benefit (FIB) policy to replace this lost income.
FIB is designed to pay a regular income to replace a loss of earnings as a result of being diagnosed with a critical illness or dying. The income is paid tax-free and can be set up on a level or indexed basis, and can also be written in trust or on the life of another.
With affordable family income benefit tenants may have fewer financial pressures if they were diagnosed with a Critical Illness because this policy could replace a large proportion of their income. It may allow them to maintain their rental commitments and possibly even continue with their savings plans.
Is having no protection in place a risk most renters can afford to take?
For more information on our Family Income Benefit speak to your usual Royal London contact or visit our CPD hub where we have a module about understanding the value of family income benefit.
Source: * State of the Protection Nation research, March 2019. 2,005 people asked, results weighted to nationally representative criteria.
1 – Life insurance cover gap revealed for UK renters, Sainsbury’s bank, June 2019