Rent guarantee insurance, sometimes called tenant default insurance, pays a landlord’s rent when a tenant stops paying. If a tenant falls into arrears, the policy covers the unpaid rent up to a set monthly limit and period, and usually the legal costs of recovering possession. It protects the income a buy-to-let depends on, and is normally taken alongside proper tenant referencing.
For most landlords the mortgage and costs still have to be paid whether or not the rent arrives. Rent guarantee cover exists to bridge that gap when a tenant defaults, so a single non-paying tenant does not put the whole investment under strain.
What does rent guarantee insurance cover?
It covers the rent a defaulting tenant fails to pay, up to a monthly amount and for a maximum period set by the policy, and typically the legal expenses of pursuing arrears and gaining possession. Some policies continue to pay for a period after possession is recovered, while you re-let. It is income protection for the landlord, not cover for damage to the property, which sits under the buildings and contents sections of a landlord policy.
How is rent guarantee different from a deposit?
A deposit is a small, capped sum that rarely covers more than a few weeks of a serious default, and it is protected in a scheme with rules on how it can be used. Rent guarantee covers ongoing arrears over months and the cost of eviction, which a deposit cannot stretch to. They address different scales of problem.
What conditions usually apply?
Insurers normally require that the tenant was properly referenced and passed, or has a guarantor, before cover applies, and that a formal tenancy agreement is in place. Claims usually begin once arrears reach a set point, often around a month, and the policy will have a monthly cap and a maximum claim period. Meeting the referencing conditions is what keeps the cover valid.
Is rent guarantee insurance worth it?
It depends on how exposed you are to a void or a default: a landlord relying on the rent to cover a mortgage has more to protect than one who does not. The cost is modest against the risk of months of unpaid rent plus eviction costs, which is why many landlords treat it as core rather than optional.
Getting the cover right
Rent guarantee works best set up alongside the rest of a landlord policy and with referencing that meets the insurer’s conditions. A broker can make sure the cover and the tenancy process fit together. To review your property cover, get a quote or speak to the team.