There are obvious differences between those that have mortgages and own their homes and those that rent their accommodation, such as getting a deposit together to purchase a property and qualifying for a mortgage, versus being able to move location at relatively short notice. For those in rented accommodation, there are other points worth considering:
If someone owns their property and runs into temporary, financial difficulty, for example an injury or illness that keeps them off work for a while, there are arrangements that can be made with their lender for a short term, leaving them in a position where there is no immediate impact on their living arrangements. However, for those renting privately, if the same event occurred, they would most likely be evicted if they could not pay rent on time and in full. When someone cannot work due to illness or injury, depending on their employer, they may be paid for a certain period of time, they may be paid “at the employer’s discretion” or they may not be paid at all. Yet, ironically, a higher proportion of people that own their homes have things like income protection or specified illness cover in place. One of the reasons for this, is that at the time of going through a mortgage application process, they are usually exposed to some degree of financial advice, whether from the lender, a broker, or a financial adviser, who may have made them aware of the options available to protect against the unexpected loss of income (or the financial impact of a serious illness). Having not gone through this process, many of those renting are not aware of these same options, despite being more vulnerable in rented accommodation. Another school of thought is that people who are making a commitment to purchase their own home, are more likely to plan for such events so that their long-term plans of owning their home mortgage-free, are not compromised. Whereas those in rented accommodation may not have given the same consideration to their long-term financial security.
In the current climate of expensive rents and very limited property vacancies, the impact on anyone in rented accommodation suffering a loss of income is even more problematic. It’s well worth taking a little time to consider how you would be impacted and investigate what options there are for you. In basic terms, the earlier (younger) someone commences income protection and/or serious illness cover, the cheaper the premiums will be. Income protection will pay a portion of someone’s income if they are unable to work due to illness or injury and suffer a loss of income, after a deferred period and until they can return to work. Specified illness cover will pay out a tax-free lump sum on diagnosis of one of the specified illnesses that are covered.
Dave Kavanagh QFA has been a Financial Advisor for over 20 years (and a Gym Instructor/Nutrition Advisor before that!) He has done advice slots on RTE 2FM and on TV3 and does the “Ask the Expert” Financial Advice section on http://mams.ie/ and he regularly gives talks and workshops at seminars and events for groups, companies and government departments on financial wellbeing, positivity and motivation.
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