The research, from Scottish Widows, found only 5% of renters have taken out critical illness cover, 3% have income protection, and 24% have life insurance, leaving them with little or no safeguards if their circumstances change unexpectedly. The figures are only slightly better for homeowners, with one third (33%) having life insurance, 11% taking out critical illness cover and 7% taking out income protection.
Against this backdrop, 31% of renters said they had taken an extended period of unpaid time off work due to illness or to care for a family member or friend.
The age of first-time buyers continues to increase
This ‘protection gap’ for renters is becoming more urgent, as the soaring cost of getting on the property ladder means fewer people can afford to buy a home. This is resulting in a greater reliance on the long-term rental market.
The age of first-time buyers is steadily increasing as the average UK house price now stands at £276,759[1], according to the January 2022 Halifax House Price Index.
Renters burdened with higher housing costs than homeowners
Renters are subject to higher housing costs on average than those who own a home. Homeowners spend £525.90 a month on mortgage payments, whilst renters spend more on rent at a monthly average of £658.
That means renters are arguably in greater need of a safety net, as their outgoings on average remain higher – and they have no property to raise credit against if needed.
However, the vast majority of renters have no cover in place. Digging into the factors for not taking out critical illness cover or life insurance, the most commonly cited reason was that it’s not a financial priority at the moment, referenced by 21% of renters. This compares to 16% of homeowners citing this reason.
Rose St Louis, Protection Director at Scottish Widows, said: “The vast majority of renters and homeowners have no cover in place and the impact of this could be really frightening. If one day they are unable to work due to health reasons or unforeseen circumstances, millions may be unable to pay their bills and asked to leave their home.”
“I would urge advisers working with non-homeowner clients, to discuss these potential issues and highlight renters increased vulnerability to financial shocks. Helping clients who rent to consider their protection needs will ensure they’ve thought about the future, with any plans taken out providing a ‘safety net’ for themselves and their families.”
