Millions of renters could find themselves unable to pay their bills should they become unable to work, as the vast majority have no insurance safety net in place, Scottish Widows has warned.
The provider found a mere 5 per cent of renters have taken out critical illness cover, 3 per cent have income protection, and 24 per cent have life insurance, leaving them at the mercy of unexpected changes.
The picture did not look much better for homeowners, of whom 11 per cent have taken out critical illness cover, 7 per cent have income protection, and a third (33 per cent) have life insurance in place.
However, Scottish Widows said the situation for renters was more dire as they were typically subject to higher housing costs than owners.
While homeowners spend £525.90 a month on mortgage payments, renters pay a monthly average of £658 on rent.
Against this backdrop, nearly a third (31 per cent) 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 provider said.
It had polled 2,000 UK adults, including 1,000 renters, in October last year.
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.”
For many the reason for not taking out critical illness cover or life insurance, was that it was not a financial priority (21 per cent of renters). This compared to 16 per cent of homeowners who cited this reason.
The protection gap for renters is also becoming more urgent as fewer people can afford to buy a home and more end up relying on the long-term rental market.
UK house prices have been increasing steadily in the past year, and have seen the strongest start to the year for 17 years, according to Nationwide’s latest house price index, out this month (February).
Annual house price growth reached 11.2 per cent in January, up from 10.4 per cent in December.
Last year was the strongest year for house price growth since 2006. It was also the best year for property transactions since 2007, despite a nine-year low in October.
But the rising cost has meant the age of first-time buyers has been steadily increasing.
St Louis said: “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."
carmen.reichman@ft.com
