Family income benefit for tenants

17 September 2020
Most people buy protection in some form whether it is life, income protection or critical illness cover when they buy a house*.

Men looking out of a windowHowever, tenants haven’t yet been through this process so the majority have no cover at all1. Admittedly they don’t have a large mortgage debt to protect but they do have a monthly commitment by way of rent to cover. What if a tenant gets seriously ill, or dies prematurely?

The rental market

Over the past few years, the estate agents’ windows where I live, and I’m sure it’s the same across the UK, have dramatically changed. Where they were historically full of properties for sale and just a few rentals, now it is at least half and half. Some businesses are just pure letting agents and only promote properties for rent.

And while some people are happy to rent in the long term, many people in our communities are renting by necessity and not by choice. They may need to wait to purchase a home until their earnings increase or until they have saved enough deposit to be considered for a mortgage.

If the worst happens

If your rental client became seriously ill, how would they continue to pay their rent? Those lucky enough to have sickness pay from their employer may be able to keep up their rental commitment. But for how long?  It’s the tenants who have no employee benefits, particularly those who are self-employed, who are very much in need of the advice of a protection specialist.

A solution maybe to consider a family income benefit (FIB) policy to replace this lost income.

Without any income these tenants may not be able to keep up their monthly rental commitments, maintain their current lifestyle and continue to save a deposit for their much-wanted own home.  A bereaved family, having lost a main wage earner, might not be able to maintain their rental commitments and their lifestyle.

Family income benefit

A solution maybe to consider a family income benefit (FIB) policy to replace this lost income.

FIB is designed to pay a regular income to replace a loss of earnings as a result of being diagnosed with a critical illness or dying. The income is paid tax-free and can be set up on a level or indexed basis, and can also be written in trust or on the life of another.

With affordable family income benefit tenants may have fewer financial pressures if they were diagnosed with a Critical Illness because this policy could replace a large proportion of their income. It may allow them to maintain their rental commitments and possibly even continue with their savings plans.

Is having no protection in place a risk most renters can afford to take?

For more information on our Family Income Benefit speak to your usual Royal London contact or visit our website.

This article first appeared in FT Adviser.

Source: * State of the Protection Nation research, March 2019. 2,005 people asked, results weighted to nationally representative criteria.

1 - Life insurance cover gap revealed for UK renters, Sainsbury’s bank, June 2019

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About the author

Shelley Read

Senior Protection Development and Technical Manager

Shelley has worked in financial services for over 25 years, starting her career in the Mortgage world and then from 2008 in protection field Face to Face Sales. Shelley was originally with Bright Grey and Scottish Provident and latterly representing Royal London in the West Midlands and Warwickshire area. Shelley moved to her current team in July 2017 and now covers all of the UK. Shelley is involved in developing adviser facing content, presenting, writing articles and commenting for the press. Shelley therefore has an in-depth knowledge of the mortgage and protection market and her strengths have been training and coaching advisers to recommend protection solutions to their clients and delivering this coaching in an easy to understand and simple way. Shelley’s area of expertise also includes Family Protection and Business Protection. Shelley hosts a monthly book club in Sutton Coldfield and also enjoys attending various cookery courses both at home and abroad to improve her cooking skills and her love of entertaining friends and family.

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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.