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Landlord Rent Guarantee Insurance

Landlord Rent Guarantee Insurance

Rent guarantee insurance, also known as tenant default insurance, is a common landlord insurance add-on which can protect you from the serious financial implications of defaulting tenants.

Here’s a look at what types of cover can be added to your landlord’s insurance to protect you from loss of rent.

Tom Harrison
Content writer
3
minute read
posted 20 MAY 2020

CORONAVIRUS UPDATE

Due to events surrounding the coronavirus pandemic, rent guarantee insurance is currently unavailable as a landlord insurance add-on. While the information on this page is accurate, you’ll be temporarily unable to compare quotes and buy a policy which includes rent guarantee insurance.

We are constantly monitoring the situation, and will update this page when we have more information.

 

 

What is rent guarantee insurance?

Rent guarantee insurance is a type of landlord insurance which could cover your rental income, should your tenants be unable to pay their rent. Even the most reliable tenants can experience financial difficulties which can result in arrears. On average, it takes 42 weeks to evict a tenant; that’s around 10 months of lost rent during the time it takes to regain possession.

What does rent guarantee insurance cover?

As well as covering the rent if your tenant defaults, usually for a period of six to 12 months, a rent guarantee insurance policy could also cover:

  • Legal expenses and cover for any disputes relating to the recovery of rent arrears, repossession or eviction processes
  • Access to a panel of solicitors who can offer legal advice on a wide range of services, not just lettings

You’ll normally find limits on the amount of cover you can receive, with both monthly and maximum limits not uncommon.

What isn’t covered by rent guarantee insurance?

While it’s important to read the details of your policy carefully, to check what’s excluded from your policy, there are a few common exclusions:

  • Deferral periods - you’ll typically find that you won’t be covered for the first month of rental arrears. You may also be unable to make a claim, for a set period, after taking out your policy. You should check details of any deferral periods before taking out insurance.
  • The defaulting tenant leaves – if you manage to evict the tenant who’s defaulted on their rent, or they leave willingly, your payments will normally end. This may be regardless of whether you’ve found a new tenant, so it’s important to check carefully.
  • You decide to sell the property - if you reach the point that you decide to put the property on the market, rather than attempt to find a new tenant, you’ll likely find that your rent guarantee insurance will stop paying out.
  • Types of tenants – you may find that insurance providers will exclude certain types of renters. For instance, those who are unemployed, are on state benefits, or students, may be excluded from your cover, as they’re seen as a higher risk for defaulting on their rent. You should also ensure that you get a tenant reference, when possible, as there may be exclusions to tenants who fail to provide one.
  • Commercial properties – if the property is used for business, you will need to arrange another form of cover.
  • Contract disputes – you won’t normally be covered for any legal costs, if you and your tenant enter a dispute over the terms of your rental contract.

How can I protect my income if I can’t rent out my property?

Although landlord insurance policies vary between different insurance providers, most will offer optional cover to protect rental income. This comes in the form of both rental guarantee and rent protection.

Rental income protection could cover the amount of rent you would’ve received during an unoccupied period, if you’re unable to rent out your property for an insured reason. These may include incidents like flood or fire damage. This is separate, and should not be confused with rent guarantee insurance/tenant default insurance, which can protect you when a tenant is unable to make their rental payments.

Before you apply for rent guaranteed insurance, ensure:

  • You have a tenancy agreement in place and the tenants have been successfully referenced
  • Your policy provides sufficient cover - check the maximum number of months and the total value from which you can claim unpaid rent from your tenant

How much is the excess for rental protection policies?

The cost of excess for rental protection is pretty much up to you. You can find policies which offer no excess fee at all, but this will naturally increase the cost of your premiums. If you’re looking to save on your premiums, excess amounts can enter into the hundreds of pounds, so it’s important you find the best balance for you. It’s great to get cheaper cover but, if your excess amount is too high, will it even be worth it if you need to claim?

Do I need a tenant reference for rent guarantee insurance?

We’d always recommend getting a tenant reference. You may find that you won’t be covered for tenants who default on their rent, who don’t provide an appropriate reference before moving in. References are used to reassure the insurance provider that the tenant is less of a risk.

Will I be covered for legal disputes with my tenant?

Contract disputes with tenants aren’t usually covered by rent guarantee insurance. If you need cover for this, you should arrange a separate landlord legal expenses insurance policy.

What other types of insurance can I get as a landlord?

Landlord insurance can include cover for many other things, including:

  • Buildings insurance – this covers damage to the structure of the building and built-in features such as fitted kitchens, wardrobes etc. This insurance can protect you against flooding, storm damage, subsidence, fire and more
  • Contents insurance – while your tenants may want to arrange this type of cover for their possessions, you should consider it to protect any furniture, carpets and curtains that are included in your rental agreement.
  • Unoccupied property cover – this can cover you with a replacement income while you’re in-between tenants.
  • Liability insurance – this form of cover can help you cover expenses if you’re taken to court because of your property.
  • Landlord home emergency insurance – this provides you with 24/7 cover and access to emergency building services, if your property requires urgent plumbing, electrical or heating work, as well as any emergency work needed to secure the property if damaged.
  • Legal expenses insurance – this can protect you for any legal expenses that you may face as a landlord. For example, the cost of taking a tenant to court over unpaid rent.

How much does rent guarantee insurance cost?

The cost of rent guarantee insurance depends on several factors, some of which can affect the price of cover significantly. The type of property you’re renting out, with the size and location being key, as well as the number and types of tenants your renting to, will all affect the rental income you normally earn. This, in turn, will affect the cost of your insurance, as you may need a higher or lower level of protection.

How can I compare landlord insurance quotes?

Enter your details and we’ll provide you with a list of suitable quotes for rental insurance for landlords. Whatever extra rent protection policy you decide to add to your landlord insurance, make sure you read the terms and conditions carefully to ensure you get the right level of cover to suit your needs.

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