Life insurance for renters

Life insurance is often talked about alongside mortgages, which can leave renters thinking it is not for them. But the purpose of life cover is to support the people who depend on you. That need is the same whether your home is owned or rented.

In some ways renters can be more exposed. There is no property to sell and no equity to fall back on, and the rent continues every month. If your income stopped, your household would need another way to meet it.

• •Rent: so your partner and children can stay in their home, or have time to find somewhere they can afford.
• •Household bills: energy, council tax, phone and broadband, food and travel.
• •Moving costs: a deposit, removals and the upfront costs of a new tenancy, if they need to move.
• •Children's costs: childcare, school and the everyday spending of a family.
• •Debts: any loans or credit that would otherwise fall on your estate or a joint borrower.

With level term cover, the amount stays the same for the whole term. That suits renters, because the cost of rent and living does not fall over time. If anything, it tends to rise.

Decreasing cover is cheaper, but it is built to follow a repayment mortgage that shrinks each year. Without a reducing debt, it would leave your family with less support in later years, when they might need the same amount or more.

Death-in-service benefit from an employer can help, but it usually ends when you leave that job.

A good starting point is to work out:

• •Your yearly rent and household costs, and how many years your family would need help with them
• •When your youngest child is likely to become financially independent, which often sets the term
• •Any debts you would want cleared
• •Savings and other cover that would already be available

The premium depends on the amount and term, and on your age, health, smoking status and occupation. It is better to choose cover you can keep paying than a larger policy you might later cancel.

Life insurance pays if you die during the term, subject to the policy terms, and many policies include terminal illness benefit where the diagnosis meets the policy's definition. It does not pay the rent if you are alive but unable to work.

A long spell off work through illness or injury is another risk to plan for. Income protection can replace part of your earnings while you cannot work, although it does not cover redundancy. See paying your rent if you cannot work and why income protection is worth considering. Many renters look at both kinds of cover together.