Some lucky landlords live the life of Riley. But for others, the landlord’s life is full of leaky roofs, faulty boilers, and broken down washing machines. Worst of all, however, come non-paying tenants. What’s the point of owning property if your money’s haemorrhaging out and there’s diddly-squat coming in? That’s why Rent Guarantee Insurance is an absolute must.
What it is?
Rent Guarantee Insurance does, to coin a phrase, exactly what it says on the tin. Also known as Rent Protection Insurance and Tenant Default Insurance, it compensates landlords for non-paying tenants. It also complements Landlord Insurance like ice and lime complement a cool gin and tonic.
Although landlords will need a separate policy for every property they own, Rent Guarantee Insurance provides excellent peace of mind by covering the cost of unpaid rent for six months. The money paid out will depend on the insurer and the level of cover chosen, but many landlords could receive up to £2,500 per month. A handsome figure, I’m sure you’ll agree.
What it isn’t
Rent Guarantee Insurance is different to Loss of Rent cover. The latter is slightly more extensive because it pays out if tenants need to vacate temporarily after incidents like floods, fires or burst pipes. Rent Guarantee Insurance, on the other hand, only compensates landlords if their tenant remains in situ.
There are also a few other limitations. If a defaulting tenant ends the tenancy, or they’re evicted, then the landlord won’t be covered. Meanwhile, most policies won’t pay out during the first month of the tenancy or indeed if the landlord puts the property up for sale.
Having said that, however, Rent Guarantee Insurance is still well worth having for a number of reasons …
Why landlords need it
Although it’s not a legal requirement, Rent Guarantee Insurance is extremely useful for every landlord – especially when there’s no guarantor in place. Life can throw a curveball at even the most reliable of tenants. Redundancy or illness, for example, might leave them unable to pay their rent for several months. In fact, the National Residential Landlord’s Association (NRLA) has found that a whopping 7% of tenants (approximately 840,000 people) now find themselves in rent arrears during the Covid-19 pandemic.
Long periods of lost rental income can be disastrous for a landlord’s finances, especially if they’re a pensioner, someone who needs the rent to supplement their income, or a buy-to-let investor with a mortgage to pay. And with deposits limited to just five weeks, retaining a tenant’s deposit isn’t nearly enough compensation. Rent Guarantee Insurance is therefore well worth considering - especially for professional landlords. The more properties they own, the greater the risk they’re taking on.
It’s also worth remembering that it can take a few months to evict tenants at the current time. And with the tenant eviction ban currently in place, chock-a-block courts could delay a landlord’s ability to take effective action.
Are there any extras?
Yes siree. Rent guarantee insurance isn’t one-size-fits-all. Landlords can often choose the level of cover they want and the excess they pay. What’s more, some policies include extras for certain eventualities e.g. to cover their rent while they search for new tenants.
Legal Expenses Insurance is another fantastic extra. With our policy, which offers 12-months’ cover with zero excess, landlords can claim up to £100,000 to pay for solicitors fees - extremely useful if a dispute over unpaid rent goes to court.
What does it cost?
Obviously the exact figure depends on the level of cover chosen, the excess, plus the amount of rent charged. However, our cover costs around the £210 per year mark.
Insurers also take other factors into account, including the type of tenant occupying a property. Students with an irregular income, for example, are considered more likely to miss rental payments than professional couples; therefore the insurance premium will be higher.
Why agents should endorse it
Landlords obviously value agents that understand their needs and give sound advice. By recommending Rent Guarantee Insurance, you’ll show existing and prospective clients that you’re proactive, appreciate their situation, and have their best interests at heart. What’s more, it’s incredibly easy to arrange. You can do it directly via our referencing platform.
When advising a landlord to take out rent protection cover, always remind them to weigh up how much they can claim and, most importantly of all, to carefully spot any exclusions in the policy. For example, some insurers won’t cover landlords renting to the unemployed or those on benefits.
It’s also worth noting that insurers insist all tenants should be thoroughly referenced before a tenancy commences. Being a landlord is a risky business. Thankfully, however, we’re here to help landlords breathe more easily.