Rent Guarantee Insurance: Essential Protection for Landlords Against Rent Arrears
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Rent guarantee insurance offers landlords vital financial protection and peace of mind when tenants fall into rent arrears or require eviction.
For landlords – like everybody else – it is an uncertain world out there, and the prospect of having a tenant falling into rent arrears, and even ultimately facing the cost of evicting them, is one of the main concerns for those considering entering the lettings market.
Aside from the lost income should a tenant stop paying the rent (especially if the landlord has a mortgage to maintain), the cost of securing an eviction can be huge, and the process can be very drawn-out – currently evictions through the courts are taking anything up to four months.
Fortunately, there is a solution which every landlord should consider: Rent Guarantee Insurance (RGI). This steps in to cover the cost of rent arrears until the landlord can gain possession, and can even provide a partial rent payment after vacant possession while the property is re-let.
Equally important, RGI generally covers the legal costs involved recovering unpaid rent or securing eviction. Such legal costs can quickly escalate, adding to the pressure for landlords who are already facing loss of income from tenants who have simply stopped paying the rent.
This is why we recommend RGI to landlords in almost every case: not just new tenancies, but for existing tenants as well. Landlords often think longstanding tenants will never present a problem, but in the current climate, tenant circumstances can change rapidly, and even trusted tenants can find themselves unable to pay the rent through no fault of their own.
RGI generally won’t cover rent arrears during the first 90 days of a new tenancy, and will only be available for existing tenancies provided there have been no rent arrears in the previous 12 months. In all cases, landlords will need to be able to provide proof of satisfactory financial referencing prior to the tenancy starting.
The cost of RGI depends on a number of factors, including the level of rent, whether the landlords is prepared to accept an excess (perhaps covering the first month of rent arrears), and the level of legal cover required. But typically a policy in Norfolk can cost as little as £200 a year – less than £20 a month.
In a world where economic uncertainty and rising cost of living can affect tenants’ ability to pay their rent, that is a small price to pay for the peace of mind of knowing you are covered should the worst happen.
Daisy Egmore is lettings property manager at Arnolds Keys.
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