Research suggests renters could be vulnerable to financial shocks because they don’t have appropriate financial protection in place. Read on to discover how financial protection works and why it could be valuable for you.
According to a report in FT Adviser, almost three-quarters of UK renters, the equivalent of more than 11.6 million people, lack income protection, which could provide a safety net if you’re unable to work.
Worryingly, just 36% of survey participants said they’d receive their full income if they were ill or injured for more than three months. In 2024/25, Statutory Sick Pay (SSP) is just £116.75 a week and is paid for a maximum of 28 weeks. As a result, many families are likely to experience an income shortfall if they needed to rely on SSP.
Income protection could offer peace of mind and financial security.
Income protection would pay out a regular income if you’re unable to work due to an accident or illness until you’re able to return to work, retire, or the term ends. It will typically pay a portion of your usual salary, such as 60%, and could provide a way to continue to meet financial commitments.
You’d need to pay regular premiums to maintain the cover. The cost of income protection varies depending on a range of factors, including your health, the level of cover, and lifestyle choices, but it could be cheaper than you expect.
As well as income protection, two other main types of financial protection could be beneficial to renters:
- Life insurance: If you have dependents, life insurance could provide them with a lump sum if you pass away during the term. The lump sum could be used however they wish, such as covering household bills, allowing your partner to take time off work, or be saved for your child’s future.
- Critical illness cover: If you were diagnosed with a covered critical illness, this type of financial protection would pay out a lump sum. The money provided could be valuable if you’re unable to return to work, need to adapt your home, or want to take time away from work to recover. The level of cover offered by critical illness varies but it could include being diagnosed with cancer, heart attack, or multiple sclerosis.
A common trigger for taking out financial protection is buying a home, but that doesn’t mean it’s something that renters should overlook, here are some important reasons why.
You’re likely to have significant financial commitments
Worries about being unable to meet mortgage repayments and losing their home often drive the decision to consider financial protection as a homeowner. Yet, as a renter, you still have significant financial responsibilities and could be forced to leave your home if you’re unable to keep up with rental payments.
Indeed, many people renting face housing costs that are as high as paying a mortgage.
According to Zoopla, a lack of supply means the average rental cost in the UK is on the rise. In July 2024, the average rent was £1,245. Separate research suggests that in April 2024, the average homeowner was paying around £950 in monthly mortgage repayments.
It’s not just rental payments that financial protection could help you cover either. You could use it to pay household bills, maintain your family’s lifestyle, or even give you the flexibility to take time off work.
You may want to take steps to protect your family
Many families first start to think about life insurance when they buy a home or welcome a child. In some cases, they might link the potential payout to the size of their mortgage, so it could be used to pay off the debt.
Financial protection could be used to provide your family with security should the worst happen, including if you rent. They may use the money to cover essential outgoings for several months, save for the future, or offer financial freedom at a time when they’re grieving.
Financial shocks could affect your long-term plans
Financial shocks don’t just affect your short-term finances, they could have a larger impact too.
For example, if you’re unable to work, you’re likely to halt pension contributions, which might affect your retirement plans. Or losing your income could mean you’re no longer putting money in a savings or investment account that was earmarked for a specific goal. In some cases, you might even need to deplete savings to meet financial commitments.
Receiving some form of financial protection might enable you to continue working towards long-term goals even when the unexpected happens.
Contact us to talk about financial protection
If you’d like to discuss if financial protection is appropriate for you, please contact us. We’ll work with you to understand your circumstances and how financial protection could be used to provide a safety net when you need it most.
Please note:
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.
