Income Protection – Why it is a must for renters
Updated – 17/11/2021
What is income protection?
Income protection insurance ensures that if you are unable to work due to an accident or illness, you will still be able to keep up with any monthly outgoings. In an ideal world, with rents being so high, you should try and save at least three months outgoings to fall back on in case of emergency. However, this is rarely the case as there is often not much left to save after you have paid your rent. This is where Income Protection comes in.
The insurance will usually pay between 50% to 60% of your usual income, tax-free, meaning you can cover bills, lifestyle costs and most importantly, rent, thus keeping a roof over your head.
Renting a property is expensive and can take up a significant portion of your monthly income. It is also imperative that rent is paid every month.
Why is it important for renters?
- If you cannot pay your rent (no matter what the reason) your landlord has the right to evict you from their property.
- If you cannot work due to illness and lose your income, you may find it hard to keep up with your rent payments and put yourself at risk of losing your home.
Income protection is the safety net which will catch you if this eventuality happens. It will help to ensure you can pay your bills and not lose your home in the event of any major issues.
Important points to be considered.
What you need to know?
- You may be in a position where the pay offered by your company would cover your outgoings. For instance, if you have worked for a company for a long time, the payment could be quite large. If you believe this to be the case, we suggest discussing this with us to determine if you would be paid enough to cover your outgoings on a long-term basis. If not and often so, income protection insurance is still worth pursuing.
- Your company offers generous sick pay, this applies to many public sector workers, although in some instances Income Protection may still be required. It is important to check with your company and Prospect Tree Mortgages to see if the sick pay would suitably cover your rent and bills when combined with any savings you may have.
- Many tenants feel as though Income Protection is not necessary as they have a good relationship with their landlord. It is true that some landlords will be lenient if you can’t pay your rent due to a sudden change in circumstances out of your control. But it must be noted that there is no legal obligation for them to give you any leeway.
As such, even if you have a fair and reasonable landlord, it is still very important to cover your income, as the end responsibility falls with you.
Prospect Tree Mortgages are experts in advising on Income Protection. We work with you to establish the best outcome and correct cover.