Legal & General is seeking to address this with the launch of its Rental Protection Plan. This is made up of three elements: an income protection benefit, life insurance, and life insurance with critical illness cover, with all three available through a single application.
“Existing products are suitable for people in the private rented sector, but we wanted to help advisers make protection more relevant to them by creating a plan especially for them,” explains Craig Brown, director of L&G Intermediary.
As well as being marketed for the private rental market, the plan also includes features that are particularly relevant to renters. Alongside the standard guaranteed insurability options, policyholders can increase cover without the need for further underwriting if they move into a more expensive rental property or their landlord puts up the rent.
Policyholders can use this option a maximum of three times for each of the products and there are limits on the increase that is available without further underwriting. For example, on the income protection element, the maximum increase is 50 per cent of the original monthly benefit, subject to a maximum of £833 a month.
Building momentum
To test the suitability of the plan, L&G ran a three-month pilot with the Mortgage Advice Bureau. Ben Thompson, group managing director at the latter, says it was good to have a product specifically for the rental market. “It really helped us to target this market,” he explains. “Protection is just as relevant for tenants, if not more so.”
Following on from this success, L&G is now rolling the plan out to other advisers. Mr Brown expects the product design will evolve as more experience is gained. As an example, he is already exploring how to make the plan more portable if someone moves from the rental sector to home ownership.
Creating a product specifically for the rental market is a helpful first step, but the industry is also looking at the other obstacles that stand in the way. In spite of the shortfalls that exist in the benefit system, individuals can be deterred from taking out their own protection because it may reduce their benefits if they subsequently need to claim.
To address this, Mr Walsh would like to see the disregard of insurance payments that is in place for mortgages extended to cover all housing costs. Through the Building Resilient Households Group, he is currently making a case for this with the Department for Work and Pensions and the Ministry of Housing, Communities and Local Government.
