The latest reseach from Scottish Widows has found that UK renters are putting themselves at risk of homelessness by failing to have a financial safety net in place.
According to the findings, 38% of private renters admit that they’d not be financially secure if their household lost its main income. And nearly four in 10 – amounting to 4.14 million people – say that if they fell seriously ill and were unable to pay their rent, they would have no idea where they would go or could be left homeless.
Yet only 4% of private renters have critical illness cover and 22% have life insurance, leaving them at risk of eviction and financial hardship due to lack of a back-up plan if the unexpected were to happen.
Renters’ worries fail to prompt action
The research reveals that more than half (51%) of renters worry about unexpectedly being unable to pay rent, a bigger concern for them than the prospect of living in a substandard property with serious issues like electrical problems or mould (36%), or having a difficult landlord (39%).
Regardless of their worries, however, almost a quarter (24%) admit they’ve never thought about what they’d do if they became ill and couldn’t afford the rent. And of those who have thought about it, over two fifths (44%) say they’d have to ask their parents to cover their payments, and two-fifths (41%) would have to move back into the parental home.
Renters are also failing to insure against common mishaps, such as theft, fire or flood. Only 32% of private renters say they pay attention to insuring their home contents against these eventualities, and just 10% of renters say they have home insurance that covers both their property and contents.
Renters still have financial obligations to protect
Renters may not be prompted by a house purchase to look at how they and their families would manage financially if they were to die or become seriously ill. But while they don’t have a mortgage to pay, they still have financial obligations, not least the monthly rent and regular household bills.
When asked about how they’d cope should they or their partner not be able to work for six months, a third (33%) of renters say they’d dip into their savings, and almost as many (31%) say they’d rely on state benefits. Their savings, however, are unlikely to cover all their outgoings and living costs for too long, with those in rented accommodation having just £9,260 put aside, compared with an average of £21,152 among mortgage holders.
And although many renters assume they can rely on benefits, working-age welfare reforms - both made and in plan - mean that fewer of them would get their rent paid in full if their circumstances changed without warning. This is particularly the case with freezes in income replacement, income top-up, and local housing allowance.
Renters’ lack of protection also points to a larger financial struggle, as almost half (46%) say they’re stuck in rented accommodation because they can’t afford to buy. A third (34%) also admit they are not saving at all, and 60% say they’re not saving for the long term because they can’t afford to.
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.
Our research demonstrates how critical it is to think ahead, and while no-one wants to think about the worst happening, having a safety net in place will provide peace of mind about avoiding eviction and being able to keep up with regular outgoings such as household bills.”
David Rochester, Head of Underwriting, Home Insurance, Lloyds Banking Group, said: “While it’s critical that renters think ahead about covering their rent in case they’re unable to work, they also need to think about bracing for other eventualities, such as damage to their possessions.
Renters may not want to think about the possibility of theft, fire or flood, but having insurance in place will help protect them and their property in such an event. Industry research tells us that an astonishing 60% of private renters between the ages of 20-30 don’t have contents insurance***. This is a significant figure, and indicates how young renters in particular risk leaving themselves financially exposed, should the worst happen and they need to replace any item of worth in their home.”