What does rent guarantee insurance cover?

Posted: 22nd Oct 2017

This autumn sees the government rolling out its much vaunted universal credits system of social benefits. Amongst the areas affected by the new rules is the replacement of the former system of housing benefit for those on low incomes, who are struggling to pay their rent.

According to a report in the Guardian newspaper on the 17th of September 2017, however, the replacement of housing benefit with universal credits may see a four or even five-fold increase in the number of tenants falling into rent arrears.

This is the figure suggested by the experience of those local councils where the new system of social support has already been introduced – in just three local authorities, £8 million in rent arrears have accumulated and as many as 2,500 tenants face the prospect of eviction.

This is very bad news for the individual tenants concerned, of course, but what if you are one of the – potentially increasing number of – buy to let landlords facing a substantial loss of rental income from tenants who are unable to pay?

Rent guarantee insurance

Although the task of any landlord is to manage tenancies in a way that minimises the risk of rent arrears and to offer solutions to tenants in temporary difficulties, the fact remains that some may slip into irreversible arrears – or abscond altogether.

In these circumstances, your first line of defence is likely to be rent guarantee insurance – arranged as one of the specialist forms of cover we offer here at Cover4LetProperty.

Our policies not only provide compensation for your loss of rental income, but also generous provision for legal protection insurance – up to a maximum of £50,000 in legal costs associated with efforts to recover rental arrears from tenants who have yet to be evicted or those who have already absconded.

What does it cover?

Rent guarantee insurance covers a number of the risks you might expect it to do from its title, namely:

  • compensation for lost rental income of up to £1,500 a month, for a maximum of six months, or until you have regained vacant possession of the let property;
  • inclusion – as standard – of full landlord legal protection, providing cover for legal fees and expenses of up to £50,000 for any one case;
  • compensation for your loss of wages or salary when you need to take time off work to appear in court or at a tribunal as a plaintiff or witness – up to £100 per person per day, up to a maximum of £1,000 for any single claim;
  • the legal costs involved in pursuit of your legal entitlement to evict a tenant – other than one who has your permission to occupy the property; and
  • a 24-hour helpline – to ensure that advice and guidance is always on hand.

Our rent guarantee insurance covers all tenant types, including long-term tenancies and those with an agreement lasting at least 6 months

A condition of the insurance is that for any tenancy agreement you first secure at least one credit reference agency report and at least one satisfactory written character reference for each tenant concerned.

The excess attached to each single claim is the equivalent of one month’s unpaid rent.