Mortgage Intelligence update: Should landlords be encouraging tenants to take out more protection?
Craig Bryce explores the benefit of encouraging landlords to pass the protection conversation onto their tenants.
There is a common belief among landlords that aside from buildings insurance, they simply don’t need protection. They believe that should they become critically ill or die, they would either sell their property or it would become part of their estate.
Ok, I admit it’s not that simple. Of course landlords recognise the importance of a good protection plan. In fact, plenty of landlords take out protection to cover their rental payments.
But if it isn’t something they need directly from the adviser, should they be passing on the protection conversation to their tenants regardless? Tenants will likely be unprotected and certainly in need of some cover.
Of course the big question for landlords is: How can ensuring tenants are protected benefit me and my business?
A large number of people renting are at a halfway point between living at home and moving into their own home. It is a common ambition in the UK to own your own home, for the security and confidence it delivers. But their hard work could all be undone if they were to fall ill and had to pay the rent with their savings.
The majority of landlords insist on a six month notice to end an agreement on a flat. If the tenant’s employer covers them for less, what would they do about the shortfall in income? This could affect the cash flow of landlords significantly.
So what is the alternative? Well, if their tenant has an income protection policy in place, it will cover most of their lost income. If the plan has a two year payment period, this would ensure that they have both the six months to cover the notice period and another 18 months grace period, in case the illness turned into a longer-term absence. Either way, they would now have two years of breathing space and steady income from the policy.
I am always surprised just how affordable an income protection policy can be. I ran a quick quote on iPipeline’s SolutionBuilder, and saw that a short term two-year payment income protection plan (to age 65 with a 4 week deferred period for £1,000 a month), can only cost between £15 and £20.
We have some great specialist income protection companies on our protection panel to go alongside the mainstream income protection providers. These include The Exeter and British Friendly, giving advisers a comprehensive selection to offer their landlords’ tenants.
With low housing supply and high deposits, many renters simply do not realise how important it is to protect their income. Landlords could be encouraging tenants to cover themselves, which is often in the financial interests of both landlords and tenants. This would also ensure what all landlords want: A long term tenant, to avoid the hassle of marketing the property out again.
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