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‘Rental Protection Plan’ from Legal & General


Pros

Cons
A protection suite targeted at private renters.Traditionally, renters (especially social housing renters) have not been a profitable area for advisers and lapse rates had been higher.
Good GIO options for renters.Few competitors in this sector so far.
Choice of IP, life and CI covers.Not currently available to all brokers.

The Product

L&G’s Rental Protection Plan offers a choice of three products through a single application and has been specifically designed for the rental market and generation rent.

The three products included are:

  • Rental Income Protection Benefit.
  • Rental Life Insurance.
  • Rental Life Insurance with Critical Illness Cover.

L&G says this means renters have the flexibility to select the relevant products to meet their needs and budget, depending on their individual circumstances.

The plan also gives tenants the opportunity in certain circumstances to increase the amount of cover if their rent increases, they relocate, or otherwise change tenancy agreement, without the need to go back through medical underwriting. This is achieved through a guaranteed insurability option (GIO).

Customers who choose the GIO, can increase their rental income protection benefit on each occasion by up to 50% of the original monthly benefit, subject to a maximum of £833 per month.

For rental life insurance or rental life insurance for critical illness cover, the amount of cover may be increased by the lower of £1,050 per month, or, the amount of the increase in the life insured’s rent. The maximum total of all increases permitted is £1,400 per month or 50% of the original amount of cover (providing the monthly benefit does not exceed the maximum allowed, based on parameters for maximum allowable benefit as calculated using the replacement ratio of 60% of the first £60,000 of income and 50% thereafter).

A full market launch via Legal & General’s intermediary partners is expected later this year.

The private rental sector has doubled in size since 2002, now sitting at 4.5 million households. Renters spend, on average, 35% of their income on rent, with the cost being above the average cost of a mortgage. Nearly a quarter of UK households are expected to be in private rental accommodation by 2023 according to Knight Frank.

What They Say

Craig Brown, director, Legal & General Intermediary, said: “Nearly a quarter of UK households will be renting by 2023 and the protection needs of these families will need to be met by products and solutions specifically designed for them. First-time buyers usually receive a protection ‘nudge’ when they seek mortgage advice, but most renters do not benefit from the same prompt. This leaves tenants facing a greater risk of vulnerability due to unforeseen circumstances.

“We believe that tenants are an underserved group in the protection market and we want to help the intermediary market to be able to better address the needs of tenants through relevant and tailored propositions.”

What We Say

“L&G has now completed the pilot stage for this plan, although it remains available only through Mortgage Advice Bureau. That looks set to change at some point and we expect the plan to be available to more advisers soon.

“Renters have generally not been targeted by protection insurers, and in the general insurance sector PPI rates for renters were generally higher than MPPI rates for mortgage borrowers too – partly reflecting the image that renters are generally poorer and perhaps more likely to run into financial and health problems too. However, ‘generation rent’ is changing that perception.

“Now, private renters often pay more in rent than homebuyers do on their mortgage and for some, the decision to rent rather than buy is a lifestyle one, not just financially driven.

“Despite all that, while mortgage protection has long been a recognised sub market, rental protection has not. L&G is to be commended therefore in targeting this sector and we hope that others will follow suit. Of the cover options, protecting income should be the priority for many, although life and CI cover is valuable too.

“The products themselves are fairly standard, apart from the GIO and the product name but those are both important – even the name potentially if you want to get the best State help.”