Rent Guarantee Insurance

What does rent guarantee insurance mean?

Rent guarantee insurance can protect some of a landlord’s rental income if an eligible tenant stops paying their rent.

It is often offered with legal expenses cover. This may help with approved legal costs linked to rent recovery or gaining possession of the property. However, rent payments and legal costs are separate parts of the cover. Each may have different limits and conditions.

Rent guarantee insurance is also different from a personal guarantor. A guarantor is a person who agrees to pay the rent when the tenant cannot. MoneyHelper explains how rent guarantors work.

How does rent guarantee insurance work?

A landlord will usually need to report the problem after the tenant misses a rent payment. The insurer or claims firm will then check the tenancy, the tenant and the reason for the arrears.

The policy may set:

• a maximum monthly payment;
• a total claim limit;
• a maximum payment period;
• a waiting period; and
• a time limit for reporting missed rent.

Some policies link rent payments to an accepted legal claim for possession of the property. A Financial Ombudsman Service decision about rent arrears shows how this type of condition can affect a claim. Policy terms differ, so landlords should not assume all cover works in the same way.

What might an insurer ask for?

Rent guarantee cover often has detailed eligibility rules. Depending on the insurer, the landlord may need to:

• obtain suitable tenant and guarantor references;
• complete credit and affordability checks;
• have a valid written tenancy agreement;
• collect any required deposit;
• keep accurate rent records; and
• report arrears within the stated time.

The checks may need to be completed before the tenancy begins. Insurers can also ask for proof that the checks met their rules.

Prompt reporting is important. One Financial Ombudsman Service decision about rent guarantee cover shows that claim deadlines and referencing conditions can affect whether a claim is accepted.

What may not be covered?

Rent guarantee insurance does not cover every loss of rental income.

A claim may be refused where:

• the tenant did not meet the policy’s eligibility rules;
• the required references were not completed;
• the landlord reported the arrears too late;
• the rent problem started before cover began;
• the tenancy type is excluded; or
• the landlord did not follow the required legal process.

Some policies may not pay if the tenant leaves voluntarily and no possession action is needed. This will depend on the wording of the policy.

Rent lost because a property cannot be lived in after an insured event, such as a fire or flood, is usually dealt with under loss of rent cover. It is not the same as a tenant failing to pay.

What should landlords check?

Before buying cover, check:

• which tenants and tenancy types are accepted;
• the required reference standards;
• how quickly arrears must be reported;
• the payment limits and payment period;
• any excess or waiting period;
• whether legal expenses are included;
• when payments stop; and
• which documents you must keep.

Read the policy wording and insurance schedule together. Cover, exclusions and claim conditions can vary between insurers.

The FCA’s demands and needs rules require a firm to identify a customer’s insurance demands and needs. When it proposes a policy, it must ensure the policy is consistent with them. Check the policy limits, exclusions and conditions before deciding whether the cover meets your needs.

How we may be able to help

We arrange landlord insurance through insurers. We can discuss whether rent guarantee and legal expenses cover may be available for your tenanted property.

Acceptance, price, limits and exclusions depend on the property, tenant, tenancy and insurer. Cover is not guaranteed, and any required checks must be completed in line with the policy terms.

Find out more about the landlord insurance we arrange.