Research has revealed that renters in the most expensive parts of the UK are paying up to 83% of their monthly income on rent. This highlights the need to raise awareness of income protection (IP) insurance in the UK, which can protect against unexpected events.
The research, conducted by apartment marketplace Housy, showed that the average percentage of UK salary expenditure on rental costs was 34%. London was the most expensive region in the country, with renters on average paying 65% of their salary towards rent. With such a high proportion of income set aside solely for accommodation, it is difficult to imagine these households being able to save a meaningful amount after also paying for food, transport, and leisure activities.
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IP insurance can therefore play an extremely important role in keeping individuals afloat during unexpected times. IP policies will pay out a percentage of an individual’s salary if they are unable to work due to sickness or injury. More expensive policies will pay a higher proportion of the salary or even pay it indefinitely.
However, uptake of IP policies remains low due to their complexity. Because of this, there is a heavy reliance on the advisory channel, with brokers and financial advisors selling the majority of IP policies by highlighting the need for these products. Most of the time, these policies are sold alongside a mortgage: 49% of IP policy holders require that their policy covers their monthly mortgage payment.
Renters also face additional monthly bills for their accommodation but it is unlikely they will seek financial advice before beginning a new tenancy. Due to this, they are very unlikely to hold IP insurance. Only 15% of IP policyholders are renters, whereas 69% of IP policies are owned by those with a mortgage. In lieu of financial advice, insurers should work with lettings agencies and websites like Zoopla to highlight the benefits of IP insurance to renters and offer these products to their customers.
The average cost of an IP policy in London is £660 ($822) per year. Meanwhile, the average salary among Londoners is £36,896 ($45,980). This equates to an IP policy costing only 1.8% – a small price to pay for customers to keep a roof over their heads should they find themselves incapacitated.
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