Landlord rent guarantee insurance
Rent guarantee insurance, also known as tenant default insurance, is a common type of cover you can add on to your landlord policy. It can protect you from the serious financial implications if tenants don’t pay their rent.
Rent guarantee insurance, also known as tenant default insurance, is a common type of cover you can add on to your landlord policy. It can protect you from the serious financial implications if tenants don’t pay their rent.
What is rent guarantee insurance?
Rent guarantee insurance is a type of landlord insurance that can cover your rental income if your tenants are unable to pay their rent. Even the most reliable tenants can experience financial difficulties, which can result in arrears. It can take up to six months to evict a tenant and a lot of rent 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 – usually between £50,000 and £100,00 to cover eviction costs
- Access to a legal advice helpline for advice on a wide range of services, not just lettings
What isn’t typically covered
- Deferral periods – typically the first month of rent arrears
- When the tenant leaves – either willingly or through eviction
- If you decide to sell the rental property
- Higher-risk tenants – those more likely to default
- 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. Policy cover inclusions and exclusions will vary between insurance providers.
If you’re looking for cover for unexpected emergencies, rental income protection insurance is another landlord insurance product available. For example, if a burst pipe caused flood damage or there was a fire, the property would remain unoccupied until the damage was repaired. Rental income protection could cover the amount of rent you would’ve earned during that period.
How much does rent guarantee insurance cost?
The cost of landlord rent insurance depends on several factors, some of which can significantly affect the price of cover. These include:
- The type of property, size and location
- The types of tenants you’re renting to
- Level of rental income
- How comprehensive your policy is – many providers offer ‘basic, standard and premium levels 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. You can find policies with no excess at all, but these tend to 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?
Yes, if you’re a landlord who cares about protecting the monthly rent you earn, rent guarantee insurance is well worth considering for peace of mind.
During times of economic uncertainty, people may struggle to keep up with their monthly rent. If that’s the case, you’re suddenly 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 rental protection insurance. These sound very similar, but they cover different types of rental loss.
Rent guarantee insurance
Rent guarantee insurance covers you for when a tenant can’t pay their rent. Rent guarantee insurance for landlords will cover those monthly rent payments, so you’re not left out of pocket. It can also cover legal fees, if you’re forced to take action against your tenant.
Rental protection insurance
Rental protection 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, which would result in a loss of rental income.
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 if they haven’t provided appropriate referencing before moving in. References reassure the insurance provider that the tenant is less of a risk.
Normally, insurance providers will also require you to run a credit check on any tenants.
Will I be covered for legal disputes with my tenant?
Tenancy agreement and contract disputes with tenants aren’t usually covered by a rent guarantee insurance policy. 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 like 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 included in your rental agreement.
- Unoccupied property cover can offer a replacement income while you’re in between tenants.
- Liability insurance can help you cover expenses if you’re taken to court because of your property.
- Landlord home emergency insurance gives you 24/7 cover and access to emergency building services 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, the cost of taking a tenant to court over unpaid rent.
How can I compare landlord insurance quotes?
Finding a quote with Comparethemarket 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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Mubina Pirmohamed - Business and landlord insurance expert
With almost 15 years’ experience in the insurance industry, Mubina is an expert from one end to the other. From leading the introduction of new products, marketing them, innovating them, all the way to handling claims with customers. At some point in her career, she’s done it all.