If you’re a landlord, you’ll likely understand that you need specialist property insurance to protect your investment, as it won’t be covered by your personal home insurance. But did you know that you might also need Rent Guarantee Insurance?
Rent Guarantee Insurance is a standalone policy that landlords take out in addition to their Landlord Property Insurance. It is a peace of mind cover, meaning that it doesn’t protect your physical assets.
Instead, it protects your rental income. So how does it work?
What is Rent Guarantee Insurance?
Rent Guarantee Insurance protects your rental income against tenant rent default. This means that if your tenant falls into rent arrears, any missed rental income will be covered.
Even if you conducted thorough reference checks on your tenants before letting to them, you never know when they will fall into financial difficulty. As such, every landlord is at risk of their tenants defaulting on the rent.
If your tenants suddenly couldn’t pay the rent or stopped paying you, would you be able to cover your costs, such as mortgage repayments and maintenance, without your full rental income?
Do I need Rent Guarantee Insurance?
You never know whether your tenants will be able to pay the rent for the full length of your tenancy agreement – they may suddenly lose their job, rack up a lot of debt, or simply decide to stop paying you.
Receiving regular rental income is likely to be a key part of your investment plan, so it’s vital that you don’t miss out on payments when your tenants fall into arrears.
That’s where Rent Guarantee Insurance comes in. This peace of mind insurance will cover your rent payments if your tenants stop paying. A good policy, such as that from Just Landlords, will also cover your legal expenses if you are forced to evict your tenants.
Therefore, taking out cover that also protects your legal expenses is even more essential, as you don’t want to accumulate high court costs from trying to get bad tenants out of your property.
What’s the difference between Rent Guarantee and guaranteed rent?
Rent Guarantee Insurance is just that – an insurance policy. It is taken out for each tenancy and will cover any lost rent during that period.
But you may have also heard of guaranteed rent schemes. So, what’s the difference?
A guaranteed rent scheme is very different. Through this type of arrangement, a landlord signs over their property to a company or letting agent for a specified period of time, in return for a guaranteed monthly income.
The agent then sublets the property to tenants and manages the tenancy. Most schemes will also cover any void periods and maintenance costs.
While this might sound like a good deal, landlords must be aware that things can go wrong. If the company offering the scheme goes bust, for example, you may struggle to get your property back.
Always conduct thorough research on the firm and agreement they’re offering before signing up to a guaranteed rent scheme.
And don’t forget that it’s a completely different arrangement to Rent Guarantee Insurance!