Rent Guarantee Insurance for Landlords in South London

Rent guarantee insurance – like all types of insurance – is a way to guard against the uncertainties of life. While you may do the very best you can to get the right tenants and secure your monthly rent, there are always things that can go wrong.

Completing comprehensive screening for prospective tenants in New Cross, Stratford, Telegraph Hill and Victoria Park can help protect you from potential issues such as rent arrears but this won’t necessarily be 100% effective. 

Taking out rent guarantee insurance is another way to protect your business against unforeseen circumstances that come your way.  

Keep reading to find out more about it. 

What is rent guarantee insurance for landlords?

Rent guarantee insurance for landlords is just that – an insurance policy you can take out to cover you for missed rent if your tenant defaults on a payment. Depending on your policy, it may also fund the legal costs of taking tenants to court. If you’re looking for a policy which covers your rental property when vacant, then you should look at empty property insurance for landlords instead.

Whether or not you opt for rent guarantee insurance very much depends on your situation. If you would struggle to pay your buy-to-let mortgage without a guaranteed rental income, or have other financial commitments, it is worth considering. However, there are a few things to bear in mind.

Want to know more? Landlords should also understand what other landlord insurance they may need, the legal requirements for landlords, and how to evict a tenant without going to court should a tenancy break down.

Who needs rent guarantee insurance for landlords?

Like any insurance policy, rent guarantee insurance is covering you against risk. Without a crystal ball, it’s difficult to tell whether you’ll get back what you pay in. You aren’t obliged to have rent guarantee insurance, but taking out a policy gives you the peace of mind that if the worst happens and your tenant fails to pay their rent you will be covered.

While it is an additional cost to bear in mind, remember that it is difficult to tell in advance which tenants will fall behind with their rent, especially given current pressures on the cost of living.

Rent guarantee insurance: what does it cover?

The two main areas of cover under rent guarantee insurance are:

Unpaid rent

While rent guarantee insurance policies for landlords will vary, most will reimburse you for missed rent soon after your tenant misses a payment – minus any excess. There is likely to be a limit of around five months on how long the policy will continue to pay out.

Legal expenses for evictions

Most rent protection policies also include legal expenses to cover the costs if you need to take your tenant to court and free legal advice. Legal costs that are covered usually include expenses for applying for eviction notices, possession claims and warrants for possession.

Some rent guarantee insurance policies also cover the cost of alternative accommodation for tenants if they are experiencing financial difficulties, but this is rare.

Rent guarantee insurance doesn’t normally pay out for lost income if your home is empty for any other reason, however, there are additional policies you can buy to cover you for void periods.

What isn’t covered by rent guarantee insurance?

Rent guarantee insurance has a number of exclusions, so it is important to check the terms for what is and is not covered before taking out cover.

The most common exclusions include:

• Lost rent when the property is uninhabitable/unsafe to rent.
• Vacant periods where there are no tenants in your property (although you can take out separate cover for this).
• Claims for unpaid rent or legal expenses that are within a specified period (typically the first 90 days).
• Where a tenant leaves the property before the end of the tenancy but is not in arrears.

Rent guarantee insurance does not cover property damage, so you would require separate insurance for these types of claims.

What is the process for getting rent guarantee insurance?

Buy your rent guarantee insurance direct from an insurer or from a price comparison website, checking that the cover is right for you and you meet the criteria. Your policy will need to be in place for a certain time period before you can claim. This may be around a month, though it could be as little as 10 days.

If your tenant misses a rental payment you should write to them, following this up with a further letter after seven days. You can then submit a claim to your insurer and, as long as your claim is valid, they will begin covering the missed rent. If you use a letting agent to manage your property, they may look after this process for you.

How is rent guarantee insurance priced?

Rent guarantee insurance costs can vary significantly. How much you will pay in rent protection premiums will depend upon the size, location and type of property – whether it is a house in multiple occupation, for example. The amount of excess taken on will also influence your premiums. This is the amount you need to pay before the insurer starts to cover your missed rent. It will also depend on the level of service you require – if you want legal cover, for example.

Shop around for quotes and use price comparison websites but make sure you compare like for like when it comes to cover. It might also be cheaper to add rent guarantee cover to your buildings and contents policy along with any other types of landlord insurance you need such as home emergency cover and landlord liability insurance.

Want to find out more? You may also want to explore fire safety regulations for landlords, how to improve your EPC rating, and whether a furnished vs unfurnished rental affects your insurance position.

What criteria must be met for rent guarantee insurance?

As with all insurance products it is important to read the conditions carefully. Your insurer may have clauses in place regarding tenants perceived to be at high risk of arrears. Most policies require you to get strict tenant background and credit checks before they will pay out. They may want details of your tenants’ employment status as well as their credit history. You won’t be able to take out a policy if your tenants are already in arrears.

Is rent guarantee insurance worth it?

Whether or not to take out rent guarantee insurance is a decision that is unique to every landlord’s circumstances. You might assess the risk of rent arrears through factors such as the financial stability of the tenant and their employment stability.

You could also consider what the financial impact would be of not having rent protection, for example, whether you would have to pay mortgage payments or whether the property is mortgage-free.

The English Private Landlord Survey 2024 revealed that 1 in 5 landlords surveyed reported having tenants in rent arrears, so it is an issue that many landlords face in areas like Limehouse, Stepney, London Bridge or Peckham.

Here are some of the pros and cons to help you to decide whether it will be worthwhile for you:

Pros

• It gives you financial protection for unpaid rent to help ensure you can cover mortgage payments and other costs.
• It provides you with peace of mind that you will have cover if a tenant is unable to pay rent and for legal expenses associated to evicting a tenant.
• You will have access to legal advice to support the eviction process and potentially be able to regain possession faster so you can move a new tenant into the property.

Cons

• You will be paying rent guarantee insurance cover premiums on top of other insurance cover and expenses you have.
• There will usually be exclusions for cover and capped payment limits.
• You will need to meet certain conditions for claims to be valid.

What other insurance policies should landlords have?

The other types of insurance policies that might be required by your mortgage lender or are highly recommended for landlords include:

• Buildings insurance covering structural damage of the property. Mortgage lenders will usually require this as a condition of the loan. This may or may not include malicious damage, so if it does not, you might want to take this out as optional cover.
• Contents insurance covering damage or loss of furniture and appliances provided in the property, but not tenants’ belongings.
• Liability insurance which covers legal fees and compensation if someone is injured in the property, such as the tenant or their visitors.
• Home emergency cover to provide repairs for emergencies such as a broken heating system.
• Legal expenses insurance is recommended if you do not have alternative cover that provide legal costs cover for eviction proceedings.

You also have the option of taking out a landlord insurance policy that usually covers most of the cover types listed above including buildings insurance, contents insurance and legal expenses cover, but all policies vary.

If you’re new to renting out property in the south and east London areas of Bermondsey, Surrey Quays, Deptford, Canada Water or Bow talk to us about our range of services for landlords, including background and credit reference checks or simply advice on your landlord responsibilities.