The need for protection is a conversation most customers will first have when they purchase a home, recognizing a significant change in their financial commitments and complying with mortgage lender requirements. However, the protection needs of renters are often not as well served as those of home buyers.
• €1,414 was the average monthly rent in Ireland at the end of last year.
• Compared to a year ago, rents in Dublin in the final quarter of 2020 were 3.3% lower, while in the rest of the country rents were 5.4% higher.
• Where homeowners see the need for protection to cover their mortgage in the event of death or ill health, renters may not have considered protection to cover their rent.
• As a result, they may be leaving themselves vulnerable if they became ill or injured and were unable to work.
Ireland’s 320,000 pluslong-term rental households may be in a precarious position with the absence of the financial security that mortgage protection provides to homeowners.
This is according to leading protection specialist, Royal London, which says that the tens of thousands of families and individuals in long-term rental accommodation should consider how they can protect themselves financially, if they were unable to pay their rental expenses. Royal London says it’s flagging the issue to encourage renters to consider the implications of not having protection in place to cover them if they got seriously sick and couldn’t work. With the right type and amount of insurance in place, those who are renting can ensure that their policy will provide financial support which can help pay for rent and other ongoing expenses if they were to get seriously ill or pass away.
Barry McCutcheon, Proposition Lead at Royal London explained,
“This year, the pandemic lockdown restrictions have had a major impact on the supply of housing to purchase, as a result of the weeks-long hiatus on construction activity.2 For many Irish people in long-term rental accommodation, this may make the possibility of transitioning from long-term rental to homeowning even more challenging. The most recent Census data show that 18% of the population lives in private rental accommodation – that’s over 850,000 people.3 A portion of these renters will have the desire to own their own property one day. But caught in the cycle of high rents, making saving for a deposit more difficult, and faced with the post-Covid-19 prospect of a renewed acceleration in housing demand and prices, many may not be in a position to own their own homes for a long time to come.”
According to the Daft.ie Rental Price Report, Q3 20204, rents in Ireland’s urban centres have doubled in the last decade, and more recently, rents in the third quarter of 2020 were, on average, 1.2% higher across the country than the same period last year. In Dublin, rents fell slightly, compared to the same time a year ago and rental stock availability in the capital is twice its level a year ago. Meanwhile, that picture is not being reflected around the country, as stock of property to rent continues to fall since 2006 and is at close to all-time lows.
Mr. McCutcheon went on to say,
“Traditionally, the demographic of renters in Ireland was single people in their 20s and early 30s – students, young professionals or those passing through on contract work who usually rented for short-term periods. Now, there is a growing cohort of families and individuals in their 30s, 40s and 50s^ who are renting long-term. For this group of people, financial security and protection will become more important as they grow older and settle down, especially if they have children to look after. Long-term renters will be vulnerable if they were to experience an accident or illness as this could have a significant impact on the household’s ability to make rental payments. That’s why we are encouraging long-term renters to review their financial capabilities and consider putting their own form of ‘Rent Protection’ in place by taking out a Life, Serious Illness and/or Income Protection policy.”
“Akin to Mortgage Protection”
Royal London says long-term renters can benefit from reviewing their finances and putting a life insurance in place. This can give them protection that’s similar to how Mortgage Protection works to protect mortgage holders with a lump sum payment if a policyholder was to pass away.
Mr. McCutcheon explained,
“Financial protection can provide peace of mind for long-term renters. By putting financial protection that’s similar to Mortgage Protection in place, they can ensure that rent or other outgoings can be maintained by the family should anything happen to the breadwinners. Life cover, also called Term Assurance, and/or Specified Serious Illness cover, will help provide this security. If you are unable to work due to illness or injury, Income Protection, sometimes called Permanent Health Insurance, can provide a monthly wage until you are able to return.
“In our experience, the main reason people are deterred from even considering taking out such cover is down to perceived cost and affordability. People may think ‘how can I afford to pay for another expense on top of my current outgoings?’ but they might be surprised to learn how little it can cost per month to have protection in place.”
Royal London said the cost of Income Protection depends on the amount of cover you need (the percentage of your income which is protected), the deferred period and the term of the policy. This is in addition to occupation, age, health and lifestyle factors. Taking an example of someone who is aged 34 next birthday; Income Protection might provide an annual benefit of €15,642 (a weekly benefit of €300) for a monthly premium of €32.25 (based on an Occupational Class 15, a deferred period of 13 weeks and a retirement age of 60).
Rents and renters on the up
The most recent Census data show a significant drop in mortgaged households in Ireland, with the total number of households with a mortgage standing at 535,675 in 2016, down by 8% on 2011.6
Royal London reports that just 44%^^of the population is estimated to have life cover in place, a figure which prompts the question ‘what proportion of the remaining 56% are renting their home?’.
Mark Winters, Allied Financial says,
“If you are renting your home, you can speak to us at Allied Financial to find out more about the financial protection you can put in place to best meet your individual needs.
Unlike our Continental European cousins where renting for one’s lifetime is commonplace, for many people in Ireland, the prospect of owning one’s own home is still very much a standard to strive for. That said, Irish society is changing, and long-term renting is increasing while homeownership is decreasing. The decline in mortgaged households poses the question, as a nation, are we moving away from the dream of home ownership in favour of lifestyle flexibility or is it the increasingly tough property market that is keeping people out of the housing market?”