Rental Guarantee Insurance for Landlords

We’ve all done it as a landlord – got in tenants that seem to be great at the beginning but after a few months they stop paying the rent. You can get insurance to cover for this. Read on.

Most tenants you get in your buy to let property or even holiday home that you rent out will pay you the full amount of rent on time and you will have no problems at all. However some do not want to pay which is a problem in itself but also you may want some peace of mind just in case something does go wrong.

When we first started renting properties out we didn’t use letting agencies and undertook a private let. In this first year of the tenant renting the property out we did get rental guarantee insurance. This simply means that if your tenant defaults on payment you still get the guarantee of having the rent being paid – although this time it’s from your insurance company. We felt this was the right thing to do at the time as we hadn’t really rented out properties before and although we didn’t have to use it because our tenants always paid on time it was something less that we had to worry about. So how does it work ?

How does rent guarantee insurance work ?

Although we have explained this all above in general terms here is some more information. You pay a small premium depending on the amount of cover you want and for how long. Most new tenancy agreements are for six months but tend to go on for longer. So for example for six months cover at £450 per month rent you will pay a premium of around £45. For those of you with flats in city centres such as London this is no where near enough. So for a £2000 month cover it just costs around £110 for that first six months or about £150 for a year.

Of course policies are different depending on the insurer you go with but generally they also offer legal expenses cover to persue rent arrears from the tenants and this will include the eviction of people who are not paying. In general these policies are normally quite good at paying out but it’s always best for insurance purposes and peace of mind to get the intial reference checks undertaken to ensure the people you are letting to are going to not only pay the rent on time but also care and look after your property.

The checks can be made by yourself, using a referencing agency or your friendly letting agent. These get references from the tenants bank and their employer. You could also get a credit check to see if they have previously defaulted on any loans or other financial commitments they may have undertaken. A lot of this is common sense but people do cut corners if they find someone and want to rent their apartment or house out fast. But at the end of the day the rent guarantee insurance is good to have just in case the unforseen does happen.