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10 reasons why contents insurance is important for low income households

The important issue of how affordable and appropriate insurance protection can help to meet the needs of the vulnerable was discussed at a joint event hosted by the All Party Parliamentary Group on Poverty and the All Party Parliamentary Group on Insurance and Financial Services on Tuesday July 8th, sponsored by Aviva.

Mark Shepherd, Policy Adviser, Property commented:

"The Association of British Insurers (ABI) is working alongside partners to make contents insurance available to as many tenants as possible, regardless of financial circumstance.

Unfortunately, some of the most vulnerable people in society are often the ones who are least likely to have insurance and therefore struggle to recover when things go wrong. 

Many social landlords are missing a trick by not providing tenants insurance. As well as protecting the most vulnerable, those covered are less likely to fall into rent arrears as they will be financially protected should disaster strike.

Below are 10 reasons why contents insurance is vital for low-income households:

  1. In times of crisis, insurance is crucial in helping people to get back on their feet. Contents insurance covers the cost of replacing your possessions if they are damaged, destroyed or stolen.
  2. Insurance does not only help in the event of a crisis, but also in managing the risk of unexpected events and providing peace of mind to tenants and landlords. This allows insurers to help landlords achieve some of the other aims, such as keeping properties in a good state of repair and providing advice on how to improve home security.
  3. Hazards like fire, flood and burglary can cause significant damage and loss and, for the uninsured, recovery can be extremely difficult.
  4. There is a general perception of an “it won’t happen to me” mentality.  However, low-income households are eight times more likely to be living in tidal floodplains than people in more affluent households.  Social-rented houses are almost twice as likely to be burgled as owner-occupied households.  Arson rates are 30 times higher in lower income communities than in affluent ones.
  5. There is often a misconception that contents insurance is too expensive. For the vast majority, contents insurance is affordable and people should shop around as much as possible to find the best value.
  6. Many tenants do not believe that their possessions are worth enough to bother insuring them.  Often, tenants calculate the value of their possessions depending on a few stand-out items, as opposed to the entirety of their possessions.
  7. Replacing belongings after a disaster can jeopardise a person’s ability to pay rent or bills, or make credit card payments.  This may lead some people to turn to unscrupulous lenders to help them meet those payments, creating a spiral of debt that is almost impossible to get out of.  Contents insurance can therefore help to sustain tenancies and prevent unnecessary eviction.
  8. A substantial amount of property damage occurs because buildings are poorly maintained. Encouraging tenants to take a responsible attitude towards their possessions is likely to help promote a culture of taking good care of the properties they rent.
  9. There is a misconception amongst some social tenants that their contents are insured by the landlord.  It is the responsibility of the landlord to insure the building itself, and the responsibility of the tenant to insure their own belongings.
  10. Some contents insurance policies also provide restricted cover for personal possessions temporarily taken away from the home by the policyholder, on holiday, for example.

Last updated 01/07/2016