I have worked in financial services for over 25 years, both in the specialist mortgage and, most recently, the protection world. I have often talked to advisers about protection for their buy-to-let (BTL) landlord clients.
More often than not I would hear familiar responses that these clients, often with a large portfolio, would continue to receive rent or, in the worst case scenario, would sell one or all of their properties should they become ill or die prematurely. But is this really the reality for the families of those BTL Landlords? What happens if this isn't as smooth a process as expected?
This has recently become very real to me - let me share the experience of my best friend Jayne.
Jayne is a mum of five children, some grown up, but three dependent children living at home. Jayne seemed to have an idyllic lifestyle, they lived in a beautiful house, she was, by choice, a stay-at-home mum and, as well as his building business, Mark, Jayne's husband, looked after their portfolio of 14 BTL properties.
Mark had been advised to take life and critical illness protection out to cover the extensive mortgages but didn't understand the consequences and, possibly, like many, didn't want to think about death so, as a result, did absolutely nothing.
During October half term five years ago, Mark died very suddenly at age just 45. He left Jayne and their five children. The youngest, Joshua, was just three at the time.
Jayne and Mark had just £150,000 life cover, not even sufficient to repay their own residential mortgage.
Jayne has really struggled over the past five years, not only coping with her own grief after Mark's unexpected death, but also the grief and understandable challenges her younger children, particularly, have endured.
She has lost much of their investment when being in a forced sale situation to release some monies. It is impossible to forecast the state of the housing market when a sudden death or critical illness happens. Sadly for Jayne this was during a particularly flat time in the Midlands housing market, so she was unable to realise the value she expected from some of their properties.
Other challenges have included property voids, late or non-receipt of rent, and the ongoing demands of maintaining 14 properties.
How different could this have been? If Mark had taken out more life cover, maybe not even enough to repay all mortgages, but at the very least a lump sum or regular monthly payments from a family income benefit policy. This would have allowed Jayne a financial security to employ a managing company.
Instead of Jayne having to deal with a broken shower, a faulty boiler, or vandalised property, the company would have looked after the rental payments and property maintenance. All she really wanted to do was grieve, and love and support her family through this sudden and tragic loss.
With the number of households with children renting privately tripling in recent years, and up to 16 per cent of millennials set to rent in the private rental sector from cradle to grave1, it seems likely, therefore, that the number of landlords will also increase to meet this demand.
Source 1 - Home Improvements, Action to address the housing challenges faced by young people. April 2018. Resolution Foundation.