Life insurance when renting

Regardless of whether you rent or buy, your home is your home, so it makes sense to protect it.

There are many different types of insurance that may be of benefit to tenants renting a house.

One form of insurance that people don’t tend to associate with renting is life insurance, but it’s something that should be considered.

Life insurance can provide many benefits to those who rent and can help to ensure that your loved ones can continue paying their rent if you were no longer around.

But what options are available to renters and what is the best policy type?

At Reassured we can secure cover to help protect your loves ones financially from just 20p-a-day.

Keep reading to find out what insurance you may need as a tenant…

Do you need insurance when renting a house?

Many believe that because they don’t own the property they live in, they don’t need life insurance to ensure their loves ones can stay in the family home.

Life insurance is more often associated with taking out a mortgage.

However, if you have dependants, could they afford to continue paying rent if the worst were to happen to you?

Life insurance can help provide the funds for your loved ones to keep paying their monthly rent payments allowing them to stay in their home if the worst were to happen and you were no longer around.

Some insurers, such as Legal & General, even offer a life insurance policy with a ‘rental based’ option[1].

This option is specifically designed to provide monthly payments to your loved ones to help cover rent. We don’t provide this option at Reassured.

Another possible alternative is family income benefit, which will provide monthly tax-free income payments to your loved ones after your passing.

Family income benefit, unlike traditional policies that pay out a lump sum, provides beneficiaries with a monthly, fixed, tax-free income for a fixed term.

What insurance do I need when renting a house?

While it’s not a legal requirement to take out any form of insurance when renting a property, it’s often a wise idea.

Landlords will have cover in place to protect their property (buildings insurance) but this won’t cover your belongings and personal items.

As a tenant, it’s likely you’ll need many layers of protection for your home. You may want to consider taking out:

  1. Tenants contents insurance
  2. Tenancy liability insurance
  3. Life insurance

Tenants contents insurance

Tenants contents insurance protects you from accidental damage, loss or theft of your belongings.

Your landlord isn’t responsible for your personal objects so it’s a wise idea to take out contents insurance to ensure your valuables are protected.

In the unfortunate event that your belongings are stolen or damaged (accidentally), without contents insurance, it can become costly to replace these items.


Tenancy Liability insurance

Typically your tenancy agreement will state that you’re responsible for any damage to items provided by your landlord.

Tenancy liability insurance protects you from accidental damage to goods provided by your landlord, such as furniture and white goods, etc.

Tenancy liability insurance is also known as tenants liability insurance.

You may not need this form of insurance if you are renting an unfurnished property.


Life insurance

Life insurance acts as a financial safety net if the worst were to happen and you were to pass away.

It’s a type of insurance that’s often associated with protecting a mortgage but it can also help to ensure that your dependants can continue living in your rented home.

A pay out from a life insurance policy can help your loved ones by providing the funds to continue making rental payments if you were no longer around.


But what life insurance policy is the best option for tenants?...

Which life insurance policy is best for renters?

There are 4 main types of life insurance policy, these are:

  1. Level term life insurance
  2. Decreasing term life insurance
  3. Whole of life insurance
  4. Over 50s plan

Which policy is best for you will depend on your personal circumstances and what it is that you’d like to cover. Some policies may be better suited to renters than others.

Let's take a look at each policy type:

Level term life insurance

  • Level term life insurance provides your loved ones with a fixed sum assured (pay out amount)
  • You’ll pay a monthly premium that will be calculated using personal factors such as your age, smoking status, medical history
  • Cover will be in place for a specified period of time, this is known as the ‘term
  • Pay out will only be made if you pass away during the term
  • May be an appropriate option for those who’re renting, as the pay out can be budgeted to help towards rental payments each month after you’ve passed away
  • Alternatively, the lump sum provided could offer the funds for your loved ones to put down a deposit to help secure a mortgage and purchase a house

Decreasing term life insurance

  • With decreasing term life insurance your pay out amount reduces over time
  • You’ll be covered for a specific time period (the term)
  • Your monthly premium will be calculated using your age, health, smoking status, sum assured, length of cover
  • Pay out will only be made to loved ones if you pass away during the term
  • A pay out from decreasing term life insurance is often used to help protect a repayment mortgage as your sum assured can reduce in line with your remaining mortgage balance
  • For this reason it may not be the best option for someone who is renting as it’s likely that your rental payments won’t decrease

Whole of life insurance

  • Whole of life insurance provides lifetime cover
  • Your loved ones will be guaranteed a pay out when you pass away (not if you pass away)
  • You’ll need to pay premiums for the rest of your life in order to keep your cover in place
  • Pay out could be budgeted to help towards rental payments if you were to pass away
  • Can be a costly option if taking out a policy at a young age and is often best suited to those later in life who’re still in good health

Over 50s plan

  • An over 50s plan guarantees acceptance to UK residents aged 50 - 85
  • No medical information at the point of application
  • Premium is calculated using your age and sum assured
  • However, your sum assured will usually be capped, (usually at £20,000 depending on your personal circumstances and budget)
  • A pay out from an over 50s plan may better suited to helping to cover funeral costs rather than protecting rent payments for your loved ones

At Reassured we can compare multiple policies from some of the UK's leading life insurance providers to help find you the best deal we can offer and cover that really meets your needs.

Life Insurance Calculator

Calculate how much life insurance you may need by filling in the costs you’d like your policy to cover.

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£137,934 is the estimated mortgage debt per household in the UK.

The purchase of a home is likely to be the largest financial commitment any of us will make in our lifetime. Your life insurance should cover your remaining mortgage balance to allow your loved ones to stay in the family home should anything happen to you.

Source: Moneynerd.co.uk

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The average monthly household budget in the UK is £2,548 (that’s £30,576 per year), which is spent on transport, food & drink, utilities (gas, electricity, water etc), clothing, council tax and leisure activities.

With energy prices hitting a record high and the cost of living rising sharply in the UK, you may wish to factor in utility bills and family living expenses into your cover.

Source: Nimblefins.co.uk

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The average personal debt of UK adults has risen to £34,566 (not including mortgage debt), with credit cards, personal loans and overdrafts being the most common forms of debt.

Factoring in any debts into your life insurance cover means that, if they need to be paid back from your estate after your passing, your loved ones won’t miss out financially.

Source: Money.co.uk

£
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According to SunLife, the average cost of a funeral in the UK is £3,953 (with the overall cost of dying at £9,200).

Funeral costs have increased by 116% since 2004 and are a significant cost which should be factored into the amount of life insurance you secure.

Source: SunLife.co.uk

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When factoring in cover for your children, you may wish to calculate the amount based on how long it is until they reach financial independence.

This could include childcare (£7,000 per year for part-time care), school expenses (£1,519 per school year for uniforms, lunches, stationary etc), as well as an additional sum for further education (this could be a contribution of up to £5,000 per year).

Sources: Daynurseries.co.uk, Primarytimes.co.uk & Savethestudent.org

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2 in 5 adults say they are relying on an inheritance to fund their retirement.

Factoring in an inheritance to your sum assured could allow loved ones to live a more financially comfortable life. Alternatively, you could leave a cash gift to a charity of your choosing.

Source: Moneyage.co.uk

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If you’re lucky enough to have your own savings or are part of the 30% of UK residents who already have a life insurance policy in place, this can provide financial protection for loved ones.

By entering your current cover, savings or death in service amount you can reduce the sum assured you require.

Source: Scottishbusinessnews.net

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How do the insurance needs of a homeowner and renter differ?

A pay out from a life insurance policy, whether you’re renting or a homeowner, will help ensure your loved ones can remain in the family home if the worst were to happen to you.

But there will be a few differences when securing cover as it’s likely renters and homeowners will require different types of cover.

Decreasing term life insurance is often best suited to those with a mortgage as your sum assured reduces over time and can reduce in line with mortgage payments.

This form of cover may not be the best option for someone who is renting as your rental amount will stay the same over time, or may even increase, meaning you’ll likely need a fixed sum assured.

Life insurance could also allow a homeowner to help pay their mortgage off in full, whereas a renter will need to continue making monthly rent payments.

Therefore, level term life insurance or family income benefit may be more suited to a renter than decreasing term life insurance.

Renting Homeowner
Pay out used to help pay rent Pay out used to help pay off remainder of mortgage (in full)
Level term or family income benefit may be the most suitable options depending on your needs Level term and decreasing term are ideal options for helping to pay off interest only and repayment mortgages
Level term or family income benefit may be good options Level term and decreasing term life insurance are ideal options

The protection gap

Buying a house is a big life event and often one that triggers a need to protect your home.

But more and more families are renting as a long term housing solution, without financial protection.

This has led to a big ‘protection’ gap between homeowners and renters.

Research shows that tenants are far less likely to have life insurance or critical illness cover than those who own their home[2]

Only 26% of renters, compared to 41% of homeowners, have life insurance or critical illness cover in place.

Interestingly, 54% of renters say they are worried about the financial implications of passing away may have on their loved ones (opposed to just 48% of homeowners).

Findings from this research suggested than renters often don’t have life insurance because they believe they don’t have enough equity or money to take out a policy.

At Reassured we believe most people would benefit from life insurance and it doesn’t have to be a costly expense.

In fact, it’s very much tailored towards your personal needs and circumstances and can cost as little as 20p-a-day when you secure cover through Reassured.

You can take out as little or as much cover as you see fit and you’ll benefit from the knowledge that your loved ones will be protected if the worst were to happen.

Joint life insurance for tenants

If you’re renting a property with a partner and have a joint tenancy agreement, you may consider taking out joint life insurance.

Joint life insurance covers two lives simultaneously under one policy.

You’ll pay one premium each month and there’s only one application form to fill out.

If one partner were to pass away, the pay out received by the surviving partner could be used to help them continue making rent payments.

The important thing to consider with joint life insurance is that there’s only one pay out, usually after the first death.

Once the pay out has been made, cover will expire and the surviving partner will need to secure new cover at an older age.

Depending on your budget, taking out separate life insurance policies can be beneficial to ensure that both partners have adequate cover should the worst happen.

Terminal illness cover

Terminal illness cover comes as standard with term policies secured through Reassured.

It provides the opportunity to make an early claim on your life insurance policy if you’re diagnosed with a life-threatening illness and given less than 12 months to live.

The pay out can help to cover medical bills, make adaptions to your home or can be used by your loved ones to cover any rental expenses.

Critical illness cover

If you were to fall seriously ill and left unable to work, finding the money to continue making rental payments could become an added financial stress.

Critical illness cover allows you to make an early claim if you’re diagnosed with a life-changing illness (listed within your policy).

This pay out can help to cover lost income and means you and your loved ones won’t have to worry about finding the money to cover your rent.

As well as helping to pay rent, a critical illness pay out can also help to pay for any private medical treatment or pay for carers.

At Reassured, we are able to add critical illness cover to a term life insurance policy for an additional cost.

Renting in the UK

  • In 2022 there were 4.61 million people living in privately rented houses[3]
  • Rental prices paid by tenants in the UK increased by 4.9% in the 12 months before March 2023[4]
  • In 2022, UK households spent on average £895 a month on private rent[5]

Compare life insurance quotes for renters

We hope this article has helped to shed light on the importance of life insurance whilst renting.

Comparing multiple quotes from a range of insurers can help you to find the right policy for the right price.

At Reassured our award-winning team can take you through the whole process of securing life insurance and can answer any questions you may have.

We’ll do our best to help you save time and money.

To help protect your home, get in touch with us for your free, no-obligation quotes.

Sources:

[1] https://www.legalandgeneral.com/adviser/protection/rental-protection/rental-life-insurance/

[2] https://www.yourmoney.com/insurance/life-insurance-cover-gap-for-uk-renters/

[3] https://www.statista.com/statistics/286444/england-number-of-private-rented-households/

[4] https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/indexofprivatehousingrentalprices/latest

[5] https://www.nimblefins.co.uk/average-uk-household-budget

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