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Renters: are you prepared for financial shocks?

Renters: are you prepared for financial shocks?

Category: Life insurance

Updated: 21/09/2015
First Published: 21/09/2015

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

If you rent your home, how prepared are you for financial shocks? Ideally you should have the same kind of protection as those who own their home, with things like savings and insurance products being vital in all walks of life, but unfortunately, far too few have suitable safety nets in place.

Renters are vulnerable

Aviva's latest Family Finances Report has revealed that a quarter of private renting families don't have any savings or investments – and 22% don't even hold a savings account – while 80% don't have any life insurance, a figure that becomes even more worrying when considering how many of those families have dependent children.

The figures stand in sharp contrast with those who own their home, too: only 11% of homeowning families with a mortgage have no savings, while over half (52%) have life insurance. There are also clear differences when it comes to other protection products, with only 4% of renting families having critical illness cover and just 3% having income protection, compared with 17% and 12% of homeowners respectively.

It means that a large number of privately renting families may not be able to cope with unexpected expenses, and even more could find it difficult should the main breadwinner fall ill or die, with a lack of suitable protection putting the security of the home – and the finances of the family – at risk.

"Renters might not have a mortgage to pay, but they still have financial obligations like bills and monthly rent," said Louise Colley of Aviva. Not having a savings cushion in place means unexpected costs could make day-to-day living a struggle, while a lack of income protection could be disastrous should they become ill and unable to work.

"With growing numbers of parents in rented accommodation, it's vital all families think about the future and put financial plans in place, regardless of whether they are a homeowner or not."

Be prepared

It's never nice to think about the worst happening, but if the main breadwinner was unable to work – or even if you were to get an unexpected bill – would you be able to cope financially? If not, it's vital to be prepared.

Start by building up a suitable savings pot. In this case, you'll probably want an easy access account so you can quickly withdraw your money should an emergency hit, and if you start putting away as much as you can (even if it's only small amounts), it could quickly add up.

Then you'll want to look into more structured forms of protection. Life insurance should be at the top of the list of priorities, and ideally you'll want to consider things like critical illness cover and income protection insurance, too. This type of protection could be invaluable should you need it, and while it may seem like an unnecessary expense, it can make all the difference in an emergency.

It's all about being prepared for the unexpected, and if you've got suitable cover in place, you'll be less vulnerable to financial shocks and can have peace of mind in knowing that your family will be able to cope.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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