Income Protection: A growing necessity for UK renters
Steve Bryan is director of distribution and marketing at The Exeter Pinhoe
House prices in the UK have reached new record highs, as the “race for space” and buyer demand, caused by the pandemic, outstrips the number of available properties on the market.
According to research by the estate agent Hamptons, this means that it is now cheaper to rent long-term than it is to buy a home.
As house prices continue to rise, so too does the average age of renters, with more than half of UK private rental households now headed by someone older than 35 years old.
Research from HSBC also predicts that the average age of first-time buyers could rise to 40 years old once the government’s Help to Buy scheme ends in 2023, meaning more people are likely to be stuck in the rental sector for a longer period.
As a consequence, many of these individuals are likely to have greater financial commitments while still renting, including families to support.
The rental protection gap
Despite this, renters have historically been less likely to have any form of financial protection, such as income protection. Taking out a mortgage has been a traditional trigger for advisers to discuss protection with their clients, but with so many people unable to take the first step onto the housing ladder, a huge proportion of the population are not having these vital discussions.
Particularly as renters get older, they are more likely to have an increased chance of being unable to work due to serious illness or injury, so it’s crucial that advisers are approaching this demographic to ensure they are protected.
However, research from The Exeter shows that only 15% of the conversations that advisers have had with clients regarding protection in the last year have been with renters.
This leaves renters at serious risk, should they find they are unable to work due to ill health, with some people likely to struggle to pay rent and cover everyday costs.
Indeed, data from the UK Rental Market Statistics 2021 Report revealed that British renters spend on average 31% of their income on rent, rising to 80% in some London Boroughs.
Advice remains key
Advisers have a crucial role to play in raising awareness of the wide range of protection policies tailored to meet the needs of those who rent, including products where cover levels increase steadily to keep pace with rising rental costs or for people who change tenancy agreements regularly.
Highlighting the affordability of these products is also vital when speaking to clients as many will be unaware that there are policies available for less than £20 a month depending on their circumstances.
As an industry, we must move past the idea that income protection is only valuable to homeowners and realise the opportunities that come with speaking to other types of clients such as renters.
With the property bubble looking unlikely to bust, advisers must instigate conversations with renters about their protection requirements and get them thinking about how they will cover rent and maintain their standard of living should they have a fall in income.