How does it work?
Rent guarantee insurance covers your monthly rental income if your tenants do not pay. Some landlord policies include cover but you usually have to add this at an extra cost.
It is different to loss of rent cover, which only pays out if you are unable to let your property due to damage covered by your landlord building insurance, e.g. fire.
You can usually make a claim on your policy once your tenants have fallen one month behind with their rent. Your insurance will then continue to pay out for a fixed period, normally between 6 - 12 months.
Do you need it?
You should think about getting rent guarantee insurance if:
You rely on your rental income to pay your mortgage
You are letting your property to new tenants
You let to tenants who are more likely to default on their rent, e.g. unemployed
You are not legally required to have rent guarantee insurance, but it could offer valuable protection if your tenants fall behind with their rent or you need legal help.
Who can get it?
You usually need to have following in place to be eligible for a rent guarantee policy:
Assured shorthold tenancy (AST) agreement: This must be in place if you are a private landlord and your tenants rent your property as their main home. You can read more about ASTs and find an agreement template on the GOV.UK website.
Tenant referencing and credit checks: These independent checks confirm that your tenants can afford their rent, and also looks at their rental history. You can use an industry body like the NLA or a rent guarantee insurer to carry out these checks.
Deposit: This should be collected from your tenant before they move into your property, and held in a deposit protection scheme. You can find more information on the government's Tenancy Deposit Scheme website.
If you fail to meet any of these criteria, your insurer could refuse to pay any claims you make, so get everything in place before you take out cover.
What does it cover?
You can protect your monthly rental income up to £2,500 for a maximum of 12 months if:
Your tenant defaults on their rent
Your tenant deliberately causes damage to your property
Your tenant refuses to leave your property following an eviction notice
You are involved in a dispute with tenants over repairs or renovations to your property
Most rent guarantee policies cover 50% of your rental income while you are finding new tenants, up to three months after the previous occupants have been evicted.
You also usually get £100,000 of legal expenses cover, which covers fees associated with eviction proceedings and tenancy disputes.
Do you have to pay an excess?
Yes, this is usually equal to one month's rent but some insurers may charge a fixed excess, for example £500.
The amount you pay towards a claim may vary depending on which insurer you choose, so use our comparison to find a policy with an excess you can afford.
What does it exclude?
It varies depending on the insurer, but most policies exclude:
Claims made within the first 90 days of setting up your policy
Claims which are not reported quickly, e.g. within the first 60 days of rent default
Claims for tenants who have a history of defaulting on their rent
Some policies also exclude certain types of tenants, for example asylum seekers.
Your insurer may also reject claims if you fail to update them with changes to your circumstances, so let them know if you get new tenants or their employment changes.
How do you claim?
Try speaking with your tenants and ask for the rent they owe before you claim on your policy. If this is unsuccessful, you must give the following eviction notices before you can claim:
Section 21 notice ending the tenancy agreement
Section 8 notice seeking possession of your property if your tenants will not leave
Your insurer may only ask you to serve one eviction notice, either Section 21 or Section 8, before they will pay your claim, so check your documents for details.
Contact your insurer once your tenants have fallen one month behind with their rent. You can call their claims number, which will be printed in your policy documents.
You can read more information about how to evict tenants on the GOV.UK website.