Life insurance goes hand-in-hand with mortgages. It's a big debt that you want to make sure no-one else is left liable for if you die. But what if you rent? Renters can still have financial dependents – i.e. other people who rely on them financially – so they might have a need for life insurance too.
If you're a renter with financial dependents, our guide to life insurance for renters is a good place to start. We can help you unpick the basics.
First, what is life insurance?
Life insurance is a policy that pays out a tax-free lump sum to your partner, family or person of your choice if you die. It can help the loved ones you leave behind keep paying for significant outgoings like monthly rent, as well as any other essential expenses. It gives you peace of mind that they wouldn't have to change their lifestyle if you died.
How does life insurance work?
It’s simply an insurance policy that pays out a sum of money if you die. When you buy it you agree to pay a monthly premium in return for the lump sum, paid out after you die. You choose how much you want to be covered for (i.e. the lump sum amount) and how long you want to be covered for (i.e. your policy 'term'). Other options include things like whether your cover is decreasing or level – but you can read more about the ins-and-outs of how the policies work here.
Why is life insurance important for renters?
Because, just like a homeowner, it could be that you have people in your life who'd be financially affected by you dying. If you rent with your partner or children, would they be able to keep paying the rent without you and your income? If the answer is no, life insurance can help.
If you rent your home, it's often your biggest monthly outgoing. If you die, this expense doesn't go away for your loved ones. Nor do other essentials like bills and food. Life insurance is a way of making sure they could keep covering these things without you. It can also go further than that, giving you peace of mind that their lifestyle wouldn't need to change at all if your income was missing.
If you're a single renter, life insurance might not be priority for you right now, as no-one else would be left struggling to pay the bills if you were no longer here. You should consider life insurance if your circumstances change – e.g. if you move in with a partner or have children.
What's the value in having life insurance?
The death of a loved one is hard enough on families, even without an unexpected financial burden. This is why life insurance can be so valuable. This kind of cover protects your surviving partner and children financially, so they can keep paying the rent and other essentials, and maintain their lifestyle if you die.
What’s more, it's money that’s easy to claim (it’s usually paid out within days or weeks). Which can’t always be said for any other savings or assets you might leave behind. If you rent a home and have loved ones you need to protect, life insurance is a simple, logical way to get covered.
When's the best time to buy life insurance?
Ideally – the sooner, the better. Because the younger and healthier you are, the cheaper it is. This is because you pose less of a risk to the insurer in terms of having to pay the policy out. Whether you rent or own your home, the key thing is whether or not anyone else would be financially affected by you dying, so you should think about getting cover in place as soon as you have financial dependents.
- If you rent, it's usually your biggest monthly outgoing
- If other people live with you and depend on you financially – like a partner or children – you'd want to know they could keep paying the rent if you died
- Life insurance is a way of making sure they'd have the money they need to keep paying the rent (and other essential expenses)
What is life insurance?
Who needs life insurance?
How much does life insurance cost?
Does life insurance always pay out?
Is it easy to claim?
This post is intended for informative purposes only and does not constitute advice.