Rent guarantee insurance explained

Posted: 24th Feb 2018

Many landlords, quite understandably, worry about what would happen should their tenants cease paying the rent or perhaps abscond leaving large debts behind.

While most landlords would hope that this will never happen to them, in reality, it is always a possibility. That is why rent guarantee insurance is worth considering.

Here’s a quick overview of how it works.

The circumstances

If one of your tenants falls into serious arrears that they cannot deal with or flees leaving you with a large unpaid rent debt, your options may be limited. Typically, you may need to choose between:

  • taking legal action (including eviction) in order to try and recover the debt from in-situ tenants or trying to trace and take legal action against tenants who have fled;
  • doing nothing and writing off the debt as a “lost cause”.

While it’s perhaps fair to assume that most landlords might not view the second option with any relish, the first brings with it potential delays and legal costs – and those costs cannot always be recovered even in the event your action is successful.

Fortunately, it may be possible to get assistance in these sorts of situations if you have a rent guarantee insurance policy.

Rent guarantee insurance

This insurance might offer you the following in such difficult circumstances:

  • cover of up to £1,500 per month for loss of rent, payable up to a maximum period of 6 months (or until vacant possession of the property has been achieved);
  • legal protection for landlords included as standard (up to £50,000);
  • loss of salary or wage income, incurred due to the time you may have had to take off work to appear as a witness or defendant at any court or tribunal hearing (up to £100 per person per day, maximum £1,000 per claim);
  • cover for all tenant types;
  • cover for both long-term leaseholders as well as those on a minimum 6-month agreement.

Important – acting responsibly

Virtually all insurance, of whatever type, requires a policyholder to take certain reasonable steps to protect both their and the insurance company’s interests. This basic principle applies to landlord insurance and rent guarantee cover options.

In this instance, in order to qualify for this cover, policyholders will be required to:

  • obtain a credit agency reference sourced from a reputable and recognised credit reference agency;
  • have at least one satisfactory and relevant written character reference for each tenant. Typically character references from close family members would not be considered appropriate.

These steps are essential if you are to reduce the risks of letting to potentially problem tenants. While these checks can never be an absolutely guaranteed method of avoiding such troubles, they can be extremely useful as a filter.

Please note also that an excess (the sum you will be expected to contribute towards the cost of any future successful claim) of one month’s unpaid rent applies to each claim made.


It is true that many landlords will say that they have never had a serious problem with tenants and arrears, yet there are also many who know just how traumatic this can be when it happens.

Rent guarantee insurance cover might help you avoid the worst financial implications of such, should it ever happened to you.