Rent Protection Insurance - Everything You Need to Know
What is it?
Rent guarantee insurance protects landlords against loss of income if a tenant defaults on their rental payments. Most policies also include cover for legal expenses and the costs incurred during repossession of the property. While there is no legal requirement to hold rent guarantee insurance, we strongly recommend taking out a policy. The annual fees are relatively low, and more than worth it given how quickly costs can mount if your tenant falls into arrears.
Why do I need it?
We recommend that all landlords safeguard their rental income regardless of circumstances. However, rent guarantee insurance is particularly invaluable if you depend on rental income to pay for your mortgage and cover your outgoings. Even the most reliable and thoroughly vetted tenants can fall victim to changes in circumstances that render them unable to pay rent. While robust referencing processes are effective at minimizing the risk of non-payment, if you rely on rent to make ends meet why not eliminate the possibility entirely?
It’s also worth considering a policy with legal cover. Evicting a tenant is a protracted, expensive process. Potential fees include*:
- £120 to serve notice (or £180 for a non-rent related Section 8 notice).
- £925 for a Section 21/8 Accelerated Procedure.
- £108 if a claim is for arrears exceeding two years.
- £300 if you are unable to attend the court hearing in person.
- £300 to apply for a warrant of execution and a County Court Bailiff.
- £860 to obtain an order to transfer up to the High Court and apply for a High Court Bailiff.
When lost rental income is factored in, the potential costs run into the thousands. Rent guarantee insurance minimizes your risk of exposure should the worst case scenario come to pass.
Who is eligible?
All landlords using an AST are eligible for rent guarantee insurance providing the following criteria is met:
- Adequately robust referencing must have been conducted with the tenants (and any guarantors) prior to letting the property. This will normally have to include a written reference from the tenant’s previous landlord/managing agent and employer.
- Credit checks on the tenants came back clear.
- The deposit taken prior to the tenancy is registered with a government-backed protection scheme.
At Home Made, we offer rent guarantee insurance starting from a price of £99.99 plus VAT for 12 months cover. Get in touch with us today to find out more about our policy options and safeguard your rental income.
*Representative fees based on the average of all major providers.