Generation rent is a term that is used regularly to describe the increasing number of renters in society today. Whilst the term generally refers to the volume of young adults who rent due to high house prices, there remains a significant proportion of older adults that also live in rental accommodation. Protecting the income of all such individuals should be a priority for any adviser but with income protection plans offering features often more appropriate for those with mortgages, many advisers have found these conversations difficult. In recent times we have seen insurers come to market with rental specific options to help with these conversations and today Aviva launch their own rental options.
A study published by Hymans Robertson in September 2019, entitled “Protecting Generation Rent” found that of the 1,001 employed renters surveyed the top two likely scenarios of concern were their;
- “landlord increasing rent to a level which [they] cannot afford” and;
- “being unable to afford rent due to illness and inability to work”.
This report is a must read for advisers and the above alone highlights how important it is for more advisers to look for ways to better penetrate the rental market and have more income protection conversations. To help with these conversations, Aviva have added two new renter specific guaranteed insurability options (or “Life Change Benefits”) to their income protection offering.
Up until now only Legal & General within their Rental IP plan, LV= and Aviva’s Living Costs Protection offered rental specific guaranteed insurability options which enable a client to increase their benefit without medical underwriting if one of two different events occur, namely;
- An increase in rent imposed by the landlord
- Moving to a new rental accommodation
In today’s upgrade Aviva will now also offer these two increase options within their full income protection plan. Interestingly they have also applied an additional option which enables the client to increase their benefit if they “move from a rental to mortgaged accommodation”. Currently, Legal & General also offer a similar option which enables a client to convert to their Income Protection Benefit plan without underwriting if they no longer rent a property and take out a mortgage.
This also brings into focus other insurers who although they do not offer specific rental GIO’s most do offer GIO’s in the event that a client takes out a new mortgage. Therefore if a client were to move from a rental accommodation and as a result takes out a new mortgage then those that include this should enable the increase.
A small detail is that some insurers do not specifically include within their GIO wordings that a new mortgage is covered and only state that it can be used if the mortgage in increased. Having spoken to a few of these it seems that they would still offer a GIO if a client took out a new mortgage, however advisers should contact their clients’ insurer to make sure this is the case on their specific policy. Where insurers are not stating this specifically in their wording but this is the spirit of the GIO, we would encourage them to provide further clarity on this in their wording. In terms of such Guaranteed Insurability Options the below highlights which insurers include in their policy wordings an increase in mortgage only, an increase in mortgage OR new mortgage and new mortgage only.
*The Legal & General Rental plan is a plan designed specifically for renters and therefore does not include GIOs for those already living in mortgaged accommodation.
In any event, the specific addition of a move from rental to mortgaged accommodation is a positive move as it adds clarity and enables advisers to have a conversation with the client about their future plans.
In terms of the amount that Aviva will allow a client to increase their benefit by when using the new GIOs this has remained at a maximum of 50% of the benefit up to £9,000 per annum. The amount of time a client has to increase the their benefit amount after the event has taken place also remains at three months (for all GIOs). See here for a full updated analysis of all insurers Income Protection GIOs
To compliment the new rental additions to their plan, Aviva also provide advisers with a host of content via their “Protection Insurance for Renters” page (click here to view). This provides marketing and conversation guides designed to help advisers have better conversations with clients that are renting and could be a valuable resource for those looking to do more in this market.
The rental market is one that has been largely untouched in terms of protection, however the need for income protection amongst renters is just as pronounced. The addition of the three rental specific Guaranteed Insurability Options to Aviva’s income protection plan and host of supporting collateral provided will hopefully give advisers more confidence to have such discussions.
There is much the industry can do to support the rental market and inroads are being made. There is however much more that can be done and we look forward to more insurers including such options and more innovation in this area in the future.