Life insurance for renters

Life insurance for renters

The number of households renting in the UK has gradually increased since the early 2000s. Gone are the days when renting was considered a short-term option for students and single professionals.

According to GOV.UK, in 2022-2023, the private rented sector accounted for around 4.6 million households in England. Of those, 30% had dependent children. The average age of private renters in 2022-2023 was 41.

While renters don’t need to worry about mortgage repayments if they should die, they may still be leaving their dependants with other financial burdens.

Whether you have a mortgage or a landlord, life insurance could offer vital financial protection for your family if you’re no longer around.

Do I need life insurance if I’m renting?

Regardless of whether you’re a homeowner or a tenant, if you have a family who rely on you financially, life insurance is something you should consider.

Ask yourself, if the worst should happen:

• Would your spouse or partner still be able to afford the rent?

• Would you be leaving debts that need to be repaid?

• How would your family cope with day-to-living expenses?

Life insurance could give them the financial support they need if you should die within the duration of the policy.

If you’re renting in later life and you don’t own a property, you might want to leave a small inheritance for the people you love. Or, you could set up a life insurance policy to specifically cover your funeral costs.

What happens to your tenancy if you die?

The first thing to understand is that your tenancy doesn’t automatically come to an end if you die.

Under the Rent Act 1977 or the Housing Act 1988, the tenancy will pass on to another living tenant, for example, your spouse or civil partner. They can continue to live in the rental home as long as they pay the rent, for the duration of the tenancy.

If you are a ‘sole tenant’ and no one is eligible to succeed the tenancy, the tenancy and its obligations will pass to your ‘personal representatives’ as part of your estate when you die. Personal Representatives will be the executors of your will, or the Public Trustee appointed by the courts if you die intestate (without leaving a will).

Do renters usually take out life insurance?

Unfortunately, life insurance is often overlooked by tenants. Most people assume that life cover is only useful for homeowners with a mortgage. For this reason, many renters could find themselves without financial protection for their loved ones if the worst should happen.

Whether it’s mortgage repayments or monthly rent – life insurance could be the difference between your dependants staying in the family home or having to leave because they’re struggling to pay the bank or landlord.

What types of life insurance do renters need?

The type of life insurance you may need depends on your circumstances, personal preference and even your age. As a renter, you might want to consider the following types of life insurance cover:

Level term life insurance

This type of policy is designed to pay out a fixed amount in one lump sum if you die during the term (length of the policy) and have kept paying the premiums. You get to decide how much you want the payout to be and how long the policy should last. The cost of your premium stays the same throughout the length of your policy, so it could be a good option if you’re used to budgeting each month.

Find out more about level term life insurance.

Family Income Benefit life insurance

This type of policy is designed to provide a regular monthly tax-free income to your dependants, rather than a lump sum, for the term of the policy. This would mean that your family could continue to make their rent payments along with other monthly bills if you should die.

Find out more about family income benefit.

Whole of life cover

As long as you keep up with the monthly payments, whole of life cover should guarantee a payout when you die. But it’s usually of a smaller value than other types of life insurance.

Find out more about whole of life cover.

Critical illness cover

This cover can be taken out either as a standalone policy or as part of your life insurance. It offers a one-off payout if you’re diagnosed with a serious condition listed in the policy. The money could help pay the rent if you’re unable to work.

Please note that you can’t compare standalone critical illness cover with Compare the Market.

Find out more about critical illness cover.

What are the advantages of life insurance for renters?

• Peace of mind that the rent can be covered, and your family won’t lose their home if the worst happens.

• Your family can use the payout however they wish – for example, to pay rent, uni fees or outstanding debts and ongoing bills.

• It’s a way for you to leave your loved ones an inheritance if you die during the policy term.

• Whole of life cover could be used to pay your funeral expenses, relieving family or friends of the financial burden.

What are the disadvantages of life insurance for renters?

• You might not need it if you live on your own and don’t have family who are financially dependent on you.

• If you take out term life insurance, cover will only last the length of the policy. When the policy expires, you won’t be reimbursed for the years you’ve paid, and there’ll be no payout when you die.

• The cost of life insurance cover can depend on your age and health, so the older you are, the more expensive your premium can be.

Can you get joint life insurance while renting?

Yes, you can take out joint life insurance with your spouse or partner while you’re renting. A joint life policy can often work out cheaper than individual policies if you’re a similar age and have no serious health issues. Just be aware that a joint policy only pays out once, when the first person dies.

If you were to split up, sorting out a joint policy can be complicated compared to walking away with your own single policy. If you end up cancelling joint life insurance, you won’t get a refund on your premium payments and you’d both need to take out new policies if you still wanted to be covered.

Find out more about joint life insurance.

What other insurance do I need while renting?

While you’re renting, you might want to consider:

• Rental contents insurance – could cover your possessions against theft, fire and water damage. Your landlord is responsible for insuring the building itself, but not for your personal belongings. Rental contents insurance can cover everything that belongs to you, including clothes, appliances, devices and even furniture if the property is rented unfurnished.

• Tenants’ liability insurance – as a tenant, you’ll be liable for any damage to your landlord’s property. Tenants’ liability could cover you for accidental damage to your landlord’s fixtures, fittings or furniture during your tenancy.

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