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Rent guarantee insurance can cover your rental income if your tenants can’t pay their rent
It typically covers you for a set amount of time while you seek repossession of the property
You can often add on rent protection cover to your landlord insurance for an extra cost
It’s sometimes bundled together with landlord legal expenses cover, which can help you cover legal fees related to an eviction
It’s not to be confused with loss of rent insurance, which can cover lost rent if your rental property is uninhabitable due to an insured event.
What is rent guarantee insurance?
Even the most reliable tenants can experience financial difficulties, which can result in unpaid rent.
Rent guarantee insurance is a type of landlord insurance that can cover your rental income if your tenants are unable to pay their rent. It’s sometimes called 'rent protection insurance' or 'tenant default cover'.
It can take up to six months to evict a tenant, and a lot of rental income can be lost during that time.
What does rent guarantee insurance cover?
Rent guarantee insurance is designed to cover loss of rent and to protect landlords’ income. Typically, it can only be used if the landlord is seeking repossession of the property.
However, it’s not the only thing it covers. Here’s a breakdown of what is and isn’t usually covered by this type of policy:
What’s typically covered
Lost rent – usually covers rental payments for six to 12 months. Monthly and maximum limits typically apply
Landlord legal expenses – often between £50,000 and £100,000 to cover eviction costs
Access to a legal advice helpline – for advice on a wide range of property and tenancy-related disputes, including evictions.
What isn’t typically covered
Deferral periods – you often need to wait until the rent has been unpaid for at least a month before you can claim, and you may need to have served an eviction notice
When the tenant leaves – either willingly or through eviction, although some providers may offer cover for a short period while the property is empty
Tenants who haven’t been properly checked – you’ll need to have done any required checks on the tenants before renting (such as ‘right to rent’ and credit checks)
Commercial properties
Rental contract disputes – might not be included in legal expenses cover
As with any insurance policy, you should read the policy wording carefully for full details. Inclusions and exclusions will vary between insurance providers.
How much does rent guarantee insurance cost?
Rent guarantee insurance is typically bought as an add-on to a landlord insurance policy for an additional cost.
The cost of landlord rent insurance depends on several factors, some of which can significantly affect the price. These include:
The type of property, including its size and location
The types of tenants you’re renting to
Your monthly rental income
How comprehensive your policy is and the level of cover
Whether legal expenses cover is included or not
How much excess you’re willing to pay.
Rent guarantee insurance excess
The cost of excess – the amount you pay towards a claim – is pretty much up to you.
Typically, the higher your excess, the lower your premium will be. Several providers offer rent guarantee policies with no excess at all. However, these may be more expensive.
While a higher excess could get you cheaper cover, it’s important to find the right balance for you. If your excess amount is too high, you may find it’s not worth making a claim.
Is it worth getting rent guarantee insurance?
If you’re a landlord who relies on the monthly rent you earn, rent guarantee insurance is well worth considering for peace of mind.
During times of economic uncertainty, tenants may struggle to keep up with their monthly rent. If that’s the case, you’re suddenly put in a difficult financial position yourself.
Rent guarantee insurance can relieve you of that potential burden by covering the rent you’ve lost. Not only that, it can also pay towards expensive legal costs if you’re forced to take legal action against the tenant.
How does landlord rent protection insurance work?
Firstly, it’s important to clarify that there are two main types of rent protection insurance for landlords: rent guarantee insurance and loss of rental income protection insurance. These sound very similar, but they cover different types of rental loss.
Rent guarantee insurance
Rent guarantee insurance covers you when a tenant can’t pay their rent. Rent guarantee insurance for landlords can cover those monthly rent payments, so you’re not left out of pocket. It can also cover legal fees.
Loss of rental income
Loss of rent insurance covers you against a property remaining unoccupied for an insured reason. This could be because the property requires repairs after suffering fire damage. These repairs could take months to carry out, resulting in a loss of rental income.
Do I need a tenant reference for rent guarantee insurance?
Getting a tenant reference is always recommended and often necessary. You may find that you won’t be covered for tenants who default on their rent if they haven’t provided appropriate referencing before moving in.
References from a previous landlord or current employer reassure the insurance provider that the tenant is less of a risk. You may also need to show that you have checked your tenants are earning enough to comfortably afford the rent.
Normally, insurance providers also require you to run a credit check on any tenants. And you’re legally required to check that all tenants have the ‘right to rent’ in the UK.
Check the terms of your chosen policy to make sure your cover is valid.
Will I be covered for legal disputes with my tenant?
Tenancy agreement and contract disputes aren’t usually covered by a rent guarantee insurance policy. However, some providers may bundle rent guarantee protection and legal expenses cover into one policy.
If you want cover for legal disputes, you normally have the option to add it to your landlord insurance for an extra cost. You'll need to check the terms of your chosen policy to see exactly what it includes, as cover can vary.
What other types of insurance can I get as a landlord?
Landlord insurance can include cover for many other things, including:
Buildings insurance – covers damage to the structure of the building and built-in features such as fitted kitchens and wardrobes. This insurance can protect you financially from damage caused by insured events such as flooding, storm damage, subsidence and fire.
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 included in your rental agreement.
Unoccupied property cover can protect your rental property if it’s going to be empty for a while between tenancies. Standard landlord insurance may not cover your property if it’s left unoccupied for more than a certain length of time – typically 30 or 60 days.
Liability insurance can help you cover expenses if you’re taken to court because of an injury or other damage sustained on your property.
Landlord home emergency insurance gives you 24/7 cover and access to emergency repairs if your property needs urgent plumbing, electrical or heating work, or emergency work to secure it.
Legal expenses insurance can protect you if you face any legal expenses as a landlord. For example, it could help with the cost of taking a tenant to court over unpaid rent.
How can I compare landlord insurance quotes?
Finding a quote with Compare the Market is easy. Just enter your details and we’ll show you 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 make sure you get the right level of cover to suit your needs.
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With over 10 years’ experience writing, editing and managing content, Emma has written and edited for some of Australia’s leading financial comparison brands, including Savings.com.au, Your Investment Property Magazine, and Your Mortgage.
Stephen Maunder is an experienced personal finance editor, having spent more than a decade working for consumer print and online titles. He won several industry awards for his personal finance features at Which?, before becoming Deputy Editor at Compare the Market.
Amy helps make sure you get the best value when choosing insurance. Thanks to more than four years’ experience at Compare the Market, she understands what people look for, working closely with insurance providers to offer you deals and services that are fair, easy to understand and right for your needs.
Our content is written by a Compare the Market expert, backed by data and enhanced by technology. Find out how we ensure accuracy and quality in our Editorial Guidelines.
