Research from Scottish Widows has found that 38% of private renters would not be financially secure if the main income in their household was lost. 39% of renters said that if they fell seriously ill, they would be unable to pay their rent and may be left homeless. This is unsurprising, considering 34% of tenants’ take home pay is spent on rent on average, compared to 18% for homeowners.
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.
Many renters, particularly the younger generation of 20-30 year olds, have difficulty making savings each month because they are spending a third of take home pay on rent- even higher in London and the South East. 34% of surveyed renters stated they didn’t save any money from their take home pay, with 60% not saving for the long-term because of affordability issues. This leaves tenants vulnerable if they were to lose their job or become seriously ill. Plus, with only 4% of renters taking out critical illness cover, and 22% with life insurance, many are at the risk of eviction if they fell seriously ill with no financial back-up plan.
When renters were asked what they’d do if their partner was unable to work for 6 months, 33% said they’d raid their savings and 31% said they’d turn to Universal Credit benefits. For those turning to savings, they may not be able to cover a loss of their partner’s income for long with the study finding that those in rented accommodation save an average of £9260. A stark comparison to the £21,152 average for homeowners.
For renters that do have a back-up plan, it would involve turning to family members to ensure they did not become homeless. 44% of renters said they’d need to turn to their parents to cover rent payments and 41% said they would need to move back to their family home. More than half of renters are worried about losing their job or falling ill and being unable to pay rent, although 24% said they’d never thought through what they would do if the unexpected were to happen.
The survey also found that tenants were failing to take in account other unfortunate eventualities- such as theft, fire or flood. With only 10% of renters stating they had home insurance that covered the property and their belongings and 32% insuring home contents, this leaves many tenants without proper insurance should something happen.
It’s clear that renters are put in a difficult position. Whilst renting is a good option for those looking for transient accommodation and the ability to easily move home, almost half of renters say they are forced to stay in the private rental sector because they can’t afford to buy.
Rent Protection Insurance is available with Upad to landlords who are concerned about their tenant's unforeseen circumstances in the future, covering from the first missed rent payment.