Renters are putting themselves at risk of homelessness by failing to have a financial safety net in place, Scottish Widows has found.
More than a third (38%) of private renters admitted that they would not be financially secure if their household lost its main income.
And nearly four in 10 (39% or 4.14 million people) said that if theyfelt seriously ill and were unable to pay their rent, they would have no idea where they would go, and could even be left homeless.
Johnny Timpson, protection specialist at Scottish Widows, said: “It’s important for people living in rental accommodation to understand the risks of signing a tenancy contract without any financial back-up in place, particularly if they don’t have much in the way of savings.
“Our research demonstrates how critical it is to think ahead, and while no-one wants to think about the worst happening, having a safety net in place will provide peace of mind about avoiding eviction and being able to keep up with regular outgoings such as household bills.”
Yet only 4% of private renters have critical illness cover and 22% have life insurance, leaving them at risk of eviction and financial hardship due to lack of a back-up plan if the unexpected were to happen.
More than half (51%) of renters worry about unexpectedly being unable to pay rent, a bigger concern than the prospect of living in a substandard property with serious issues like electrical problems or mould (36%), or having a difficult landlord (39%).
However (24%) admitted they’ve never thought about what they’d do if they became ill and couldn’t afford the rent.
And of those who have thought about it, over two fifths (44%) said they’d have to ask their parents to cover their payments, and two-fifths (41%) would have to move back into the parental home.
Renters are also failing to insure against common mishaps, such as theft, fire or flood.
Only 32% of private renters said they pay attention to insuring their home contents against these eventualities, and just 10% of renters said they have home insurance that covers both their property and contents.
David Rochester, head of underwriting, home insurance, Lloyds Banking Group, said: “While it’s critical that renters think ahead about covering their rent in case they’re unable to work, they also need to think about bracing for other eventualities, such as damage to their possessions.
“Renters may not want to think about the possibility of theft, fire or flood, but having insurance in place will help protect them and their property in such an event. Industry research tells us that an astonishing 60% of private renters between the ages of 20-30 don’t have contents insurance.
“This is a significant figure, and indicates how young renters in particular risk leaving themselves financially exposed, should the worst happen and they need to replace any item of worth in their home.”
Renters may not be prompted by a house purchase to look at how they and their families would manage financially if they were to die or become seriously ill.
When asked about how they’d cope should they or their partner not be able to work for six months, a third (33%) of renters said they’d dip into their savings, and almost as many (31%) said they’d rely on state benefits.
Their savings are unlikely to cover all their costs for long, with those in rented accommodation having just £9,260 put aside, compared with an average of £21,152 among mortgage holders.
And although many renters assume they can rely on benefits, working-age welfare reforms mean that fewer of them would get their rent paid in full if their circumstances changed without warning.
Renters’ lack of protection also points to a larger financial struggle, as almost half (46%) said they’re stuck in rented accommodation because they can’t afford to buy.
A third (34%) also admitted they are not saving at all, and 60% say they’re not saving for the long-term because they can’t afford to.