Life insurance for renters
If you’re a tenant, you might not see the point of getting life insurance. But financial protection for your family isn’t just an option for those with a mortgage. Life insurance can also offer a number of benefits if you rent your home.
If you’re a tenant, you might not see the point of getting life insurance. But financial protection for your family isn’t just an option for those with a mortgage. Life insurance can also offer a number of benefits if you rent your home.
Life insurance for renters
The number of households renting in the UK has almost doubled since the early 2000s. Gone are the days when renting was considered a short-term option for students and single professionals.
In 2020-21, the private rented sector accounted for around 4.4 million households in England. Of those, 30% had dependent children. The past 10 years has also seen a rise in people aged 45-64 renting rather than owning their homes.
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.
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 – and 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, most people tend to assume that life insurance 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?
It 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 pays out a fixed amount in one lump sum if you die during the term (length of the policy). You get to decide how much you want the pay-out 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.
Family Income Benefit life insurance
This type of policy provides 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
This type of policy is suitable if you’re in your later years. As long as you keep up with the monthly payments, there will be a guaranteed pay-out when you die. For this reason, whole of life cover can be more expensive than other types of life insurance. If you’re renting and don’t own a home of your own, it could be used as a small inheritance for the people you love. Or you may want to take out a policy to cover your funeral costs or any outstanding bills when you die.
Find out more about whole of life cover
Critical illness cover
This is additional cover that can be taken out as part of your life insurance policy. It offers a one-off pay-out if you become seriously ill and can’t pay the rent because you’re unable to work.
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 should happen.
- Your family can use the pay-out 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 a small inheritance, even if you don’t own a home of your own.
- 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 pay-out 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. The policy can’t be divided either, so if you were to split up, it would no longer be valid, and you wouldn’t get a refund on your premium payments.
What other insurance do I need while renting?
While you’re renting, you might want to consider rental contents insurance to 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.
As a tenant, you’ll be liable for any damage to your landlord’s property. Tenants’ liability insurance can cover you for accidental damage to your landlord’s fixtures, fittings or furniture during your tenancy.
Frequently asked questions
What is the life insurance protection gap?
The protection gap essentially means that people who need life insurance aren’t considering it. While most people think about taking out life insurance when they get a mortgage, renters don’t have that same incentive. This could mean that many families renting won’t have a financial safety net when they may need it the most.
Is it worth getting life insurance if I’m renting?
While life insurance can provide a financial lifeline for your dependants, it might not be suitable for everyone.
You might not need life insurance if:
- You’re single.
- Your partner earns enough to support your family. financially if anything should happen to you.
- Your employer provides death in service benefit.
You should also check if you’re already covered through your work. You might have death in service cover as part of your employee benefit package – although this will only cover you while you’re working for the same employer.
Will I have to change my life insurance if I move?
You could consider updating your life insurance if you move to a bigger rental property or decide to buy and take out a mortgage. This will ensure that your family has the right amount of financial protection if you die.
You should let your insurance provider know if you move home. You can check who else you need to tell using our handy home movers checklist.
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