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Insurance that every individual needs…

Insurance that every individual needs… 40

By Graham Hayward, Chief Operating Officer, Housing Hand

 

The private rented sector accounts for 4.4 million households, according to the 2020/21 English Housing Survey. That’s 19% of people in the UK renting privately, many of whom – the so-called Generation Rent – are unable to buy their own home. 

Private sector renters have had a rough ride over the past couple of years and there is scope for the sector to better support them. This can, in part, be achieved through appropriate insurance products, as I’ll discuss shortly, but let’s first take a quick look at some of the issues that renters are currently facing.  

When the renter moves properties, they are expected to have two deposits in play, as there’s an overlap between paying a new deposit and receiving their current one back. This has always been the challenge with a cash deposit. And it’s precisely the reason that we’re seeing more products on the market focused on deposit-less renting, which can support renters to move from one property to another more easily. 

Depending on the nature of the tenancy, the financial burden may not just be limited to the need to find two deposits. In houses in multiple occupation (HMOs), for example, joint and several tenancies carry their own risks. Many renters – and their guarantors – are unaware that even if they pay their own rent on time, they may be liable to make up the portion of the rent owed by any other non-paying housemates. There’s plenty of scope to educate renters about the pitfalls here and support them to find products and services that will mitigate their liability. 

Another issue is the increasing number of people who are failing the referencing process. The process can be stressful for those going through it and it can take up valuable time – a major source of frustration to renters looking to secure the property they want on a short timeline. 

Clearly, there is a space here for an insurance product to fill. Actually, there’s room for several products, as we can see when we examine the available options. This means that tenants need to be careful about which product or service they choose. Some, for example, won’t pay out until a tenancy ends, which can be too late to meet the need in question. 

For tenants in need of a guarantor, using a rental guarantor service provides peace of mind, as well as practical assistance. As well as helping tenants to tick all the right boxes during referencing, a guarantor service can provide other benefits. Some services, for example, allow renters to obtain pre-validation, which means they have the commitment of having a guarantor before they find a property. This mitigates the risk of losing a property due to delays in the referencing process. 

A rental guarantor service is about more than convenience, though. Using one means that the tenant has a backup, should they become unable to pay their rent. This means they don’t risk their credit score or the potential of eviction the moment they run into financial difficulty. From the landlord’s perspective, it also provides the reassurance that they’re not going to end up out of pocket. 

There are also an increasing number of alternative deposit and deposit-less services on the market. These vary widely in terms of costs and how they operate, as well as the amounts that they will cover, so renters need to shop around to ensure they find the right product to meet their needs. 

With an alternative deposit or deposit-less service organised, renters can enjoy a far more manageable situation than trying to have two deposits on the go at the same time. 

Other services are specifically available for renters living in HMOs. Tenants who have signed joint and several contracts, for example, can sign up to services that limit their liability to only cover their share of the rent, not their housemates’ shares. Meanwhile, many providers of property-related services also cover contents and valuables as part of the rent, most notably in the rapidly growing Build to Rent sector and the purpose-built student accommodation sector. 

With the average UK house price having recently hit eight times the average salary, and an eye-watering inflation surge pushing up the cost of living, the proportion of households renting privately is unlikely to fall anytime soon. In fact, it’s likely to do quite the opposite. As such, rental guarantor services and depositless renting services now fit firmly into the category of insurances about which every individual needs to know. 

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