There is a substantial gap between the types of insurance held by renters and mortgage owners, with 34.9% and 25.5% of people with a mortgage taking out life insurance and income protection, respectively, while corresponding percentages drop to 17.3% and 4.3% for those living in privately rented accommodation.
The substantial gap between renters and mortgagors is likely due to the lack of awareness of products that can benefit renters, says GlobalData, a leading data and analytics company.
Legal & General recently rolled out three new products specifically aimed at protecting renters. While this is beneficial to a growing demographic that is typically more vulnerable than homeowners, more needs to be done to raise awareness about the benefits these products bring.
Yasha Kuruvilla, Associate Analyst at GlobalData, explains: “The three new products rolled out include rental income protection, rental life insurance and rental life insurance with critical illness cover. While these three products are tailored specifically to renters, they provide the same sort of protection as their counterparts for mortgage holders.”
According to Legal & General, nearly a quarter of UK households will be privately rented by 2023. This suggests protection products specifically tailored to renters will become increasingly important in the future. However, while creating these products is a step in the right direction, the main challenge lies in getting renters to think about these products in the first place.
Kuruvilla adds: “During the mortgage application process, most people will meet with a financial advisor or mortgage broker to discuss different options. The topic of life insurance or income protection as a means to cover the cost of a mortgage in case of unforeseen mishaps is often discussed at this time. However, this conversation is unlikely to be held with renters because the majority do not meet with an advisor or insurance broker prior to entering into a tenancy agreement. This leaves this group of people much less protected, despite having similar monthly commitments to mortgage holders.
“To address this issue, insurers should work with letting agencies and popular rental platforms such as Zoopla and SpareRoom to highlight these products to renters and get them thinking about the benefits they bring.”