As a renter, your rent payments are usually a significant chunk of your regular monthly outgoings. If you were to lose your income for health reasons, you might end up struggling to pay the rent. This is where income protection can help, making sure you’ve always got money coming in, even if you can’t work.
What is income protection?
Put simply: income protection is an insurance policy that pays out if you’re unable to work for any medical reason – physical or mental, illness or injury. It doesn’t pay out for any other kind of income loss, like redundancy.
The idea of this kind of cover is to protect yourself financially in case you couldn't work for health reasons. People typically claim on their income protection policy for things like long-term back pain, serious injuries caused by accident, and depression, but also for other illnesses like cancer, heart attacks and strokes.
Income protection offers a longer-term solution than something like sick pay – and also prevents you from needing to use your savings, take on debt, or significantly change your lifestyle. Crucially, if you’re a renter, income protection is a way of protecting the roof over your head in case you lose your income through illness or injury.
How does income protection work?
As with any insurance policy, you pay a monthly premium to be insured; then, if you’re signed off work for any medical reason, you’ll receive monthly income protection payments.
Most insurers will cover up to 50-60% of your income, which is usually enough to make sure the essentials are covered – like your rent, bills and food. And all income protection policies will have a waiting period before they start paying out. The longer your waiting period, the cheaper the insurance will be – but you’d need to be able to tide yourself over without an income for the time that you’re waiting.
When buying cover, you have the option of short-term income protection, which covers you for a fixed amount of time if you’re unable to work (like 1, 2 or 5 years), or full-term income protection, which will cover you for as long as you can't work, however long that is. Full-term is more expensive than short-term for that reason, but as it covers you indefinitely, it gives you complete peace of mind that you’d always have money coming in, however long you were off sick.
For more on the ins-and-outs of income protection and how it works, read our complete guide.
Do I need income protection as a renter?
Whether or not you need income protection as a renter depends on your personal circumstances. Like whether you have someone else you could rely on financially, or equally, whether you have other people relying on you financially. It also depends what sick pay and savings you have, and how much a long-term period of illness could affect you financially.
For any renter, rent is usually your biggest monthly outgoing. Not being able to keep up with your rent can have serious repercussions on you, your home, and your loved ones – which could be particularly stressful at a time when you’ve been signed off work due to ill health.
If you’ve got income protection in place, you won’t face this problem. It makes sure you’ve always got enough money coming in to cover the rent and other essentials; which might not be the case if you were relying on sick pay or savings, or someone else. It's definitely something to consider if you think a long-term period of being unable to work could affect your ability to pay the rent.
What’s the risk of not having income protection as a renter?
Renting might be a shorter-term commitment than buying – but it’s still a financial commitment. If you lose your income for health reasons, you might not be able to keep up with the rent, and the home you live in could be at risk. You might also be forced to use up savings or take on debt to cover the rent, which could set you back further down the line.
If you lose your income for health reasons, how significant and immediate the consequences are for you again depends on your circumstances:
- If you’re single, you might not have anyone else who could support you financially. Perhaps you could rely on sick pay and savings for a bit – but for how long? What's your alternative?
- If you have a partner, could they cover the rent on their own, or would they also struggle financially without your income? How would you cope financially if you couldn't work for a long time, and what impact would that have on where you live?
- If you have children, does it feel even more important to protect the roof over your head in case you lose your income and can't pay the rent?
Whatever your circumstances, with income protection in place, you can make sure your rent and expenses will always be covered. Leaving you to fully focus on getting better and getting back into work without having to worry about paying the rent. For many renters, that peace of mind is the deal-breaker.
- Income protection is an insurance policy that pays out a monthly amount if you can’t work for medical reasons
- If you become too ill or injured to work and lose your income, you might struggle to keep up with your monthly rent payments
- Income protection is a way of making sure you could always pay your rent (and other essential expenses) even if you can’t work for medical reasons
- For renters, income protection provides peace of mind that losing your income for health reason would not put the roof over your head at risk
This post is intended for informative purposes only and does not constitute advice.