By Cathy Lloyd
Just imagine. You're on the steps of your home after a weekend away visiting a friend. It's been great, but now you're looking forward to a night in your own bed. You turn the key, step inside and… that mini-break glow is gone in an instant. Somebody's broken in and ransacked the place. They've taken the TV, your tablet, even the bowl of spare change. It's a big shock. What's more – you know you don't have any contents insurance. What are you going to do?
Households under threat
Sadly, many people experience the distress of this type of incident every day. It's bad enough having your home burgled, but without insurance cover, the expense of replacing or repairing items using savings, a credit card or payday loan can see some people fall into financial difficulties. It may also affect their health and emotional wellbeing. For those in lower-income households it can be particularly difficult, according to our financial inclusion report 1.
The report, which surveyed UK renters in households earning under £17,000, found that 63% (2.6 million people) do not have household contents insurance. This is despite being more likely than other groups to suffer damage to, or loss of, possessions by burglary, fire or flood.
Theft, flood and arson
In fact, the Association of British Insurers figures show that low-income households face significantly higher risks than more affluent ones: social housing tenants are twice as likely to be burgled as owner-occupiers; arson rates are 30 times higher in lower-income communities than higher-income; and low-income households are eight times more likely to be on the tidal floodplain than better-off households 2.
The report also found that one in three (33%) low-income renters had experienced a potentially insurable loss during the past five years (this rises to 47% among 18 to 34-year-olds) and around 250,000 people (27%) had relied on credit cards, payday or bank loans to replace or repair belongings. In almost all cases (95%) this had resulted in an adverse impact on long-term finances.
The report backs up that people choosing to take out cover get a feeling of security. Nearly three-quarters (72%) of low-income renters with contents insurance say that it provides them with peace of mind, while six in ten (58%) say it makes them feel protected. However, many of those without cover say that they feel stressed, vulnerable or nervous about their lack of insurance. For example, nearly half (46%) of low-income renters who say that they would need to rely on a payday loan if they experienced a loss, say that they would find it stressful and one in three say they would be embarrassed or upset.
So why are renters in low-income households choosing not to take out cover when the benefits seem to stack up? The report finds that there are many different reasons, but nearly half those surveyed (44%) believed the premiums would be too expensive and 22% said they felt insurance was poor value for money.
We are committed to improving the financial resilience of lower-income households with initiatives and products that can be accessed easily by everyone. We provide affordable tenants cover through brokers for those in social housing and are currently working with Moneyline, a leading not-for-profit social lender, to pilot a new home contents insurance product for low-income customers. It is designed to be taken out at the same time as a loan to protect against financial shocks and will provide continuous cover if a customer needs to take a payment break for any reason.
Adam Beckett, our Product Director for UK General Insurance, said: "We hope that this will prove the worth of insurance to this vulnerable sector of society that are traditionally under-insured and lacking in financial resilience."