People who rent a house are significantly less likely to have life insurance and critical illness cover than homeowners, a study has found.
According to the research by Sainsbury’s Bank, only a quarter (26%) of tenants are likely to have a suitable life insurance or critical illness policy. This compares to almost half (41%) of homeowners.
The ironic part is that tenants are, apparently, more concerned about the financial implications of them passing away before they reach “old age”. Indeed, 54% of renters are concerned about this happening, compared to 48% of homeowners. In fact, 21% of tenants admitted they worried about this eventuality on a weekly basis, compared to just 16% of people who own a home.
UK private rental market continues to grow
Data released by the Office for National Statistics (ONS) in January 2019 shows that the UK private rental sector is growing. In 2007, the number of households renting privately in the UK was 2.8 million. Fast forward to 2017 and that number had risen to 4.5 million – an increase of 63%.
The same ONS data reveals that it’s younger households who are more likely to rent, with the 25 – 34 years age group representing the largest proportion of renters (35%).
In other words, the UK private rental sector has witnessed significant growth over the past 10 years, driven largely by younger generations who perhaps still aren’t in a position to get a foot on the property ladder.
This reality further highlights the need for products such as life insurance and critical illness cover – especially for younger age groups. Tenants should consider what their spouse or partner and children would do if they were suddenly unable to cover the monthly rental payments because of a serious illness or they passed away.
The average weekly household expenditure in the UK is £572.60. According to the Sainsbury’s Bank research, the average renting family should have £687,000 worth of life cover as a financial safety net.
Not enough equity, procrastination top reasons for no cover
In terms of the reasons why so many renters do not have life insurance and critical illness cover, the survey revealed 29% do not because they believe they don’t have enough equity or money to justify having a life insurance policy (vs. 11% of homeowners), 18% simply haven’t got round to it yet and 14% said it’s because they have no dependents.
Sainsbury’s Bank says major life events are the top reasons why people chose to take out protection. The number one life event is buying a house (34%). That’s followed by having a child (17%) and getting married (12%). A further 9% of respondents said they took out life insurance following an unfortunate experience such as an illness.
Speaking about the findings of the research, Karen Hogg, head of insurance at Sainsbury’s Bank, said: “As more people are raising families in rented accommodation, we need to shift our thinking in terms of life and critical illness cover only being relevant for people with a mortgage. That’s just not the case. All people need to consider what protection their partner and children may need should anything happen to them, including how to cover rent, bills and household essentials.”
Unfortunately, it’s too late to consider taking out suitable financial protection after a life-changing event has occurred. Even if you’re a renter, you should be thinking about how your family would survive if you were no longer around and make plans now to safeguard their financial future.
Stephen joined Premier Choice in 2006 as a Group Risk consultant and became Head of Group Risk in June 2013. In December 2017, Stephen also took over responsibility for the Protection division within Premier Choice and works to grow this in the same way he has the Group Risk division. Protection is a specialist area and fits well with his experience and expertise in the group risk market.