What Is Rent Guarantee Insurance For Landlords In East London? 

Becoming a landlord can generate a high income but there are some financial risks involved. If your tenant does not pay their rent, you will not be receiving rental income. And if you have a mortgage on the property, you will still need to make mortgage repayments and cover any other costs such as council tax. 

Fortunately for landlords, there are several insurance options that can protect them from loss of rent. In areas such as Stratford and Forest Gate, where there is a high demand for rental properties, void periods where you have no rental income should be minimal, but you could still be at risk of tenants defaulting on their rent. 

In this article, we explain the different types of cover included in rent guarantee insurance to help you to decide whether it will be beneficial to you. 

What Is Rent Guarantee Insurance? 

Rent guarantee insurance cover is a type of property insurance that protects landlords from the risk of non-payment of rent. There are different options for cover, providing insurance for a range of risks. Before you choose your landlord insurance policy, you should review all the options to identify the best one for your needs. It is also important to review the terms and conditions to check you have all the cover you need. 

Rent protection insurance is a different type of property insurance, covering rental payments in the event of vacant possession due to an insurance reason, such as repairs following severe water damage. It’s a great way to build on the governments advice on how to let property and protect your tenancies. 

What Does Rent Guarantee Insurance Usually Cover? 

Tenant Default Cover 

Tenant default cover offers protection against loss of rental income when a tenant fails to pay. Even if you carry out comprehensive financial checks on a tenant before they move in, there is still a risk that they could default at some point, for example, if their employment circumstances change. Taking out tenant default cover will help ensure the landlord is not out of pocket if a tenant misses their rent payment. 

Legal Expenses 

Landlords can also take out insurance that includes legal expenses cover, so if they need to evict a tenant or claim expenses related to property damage, these legal costs are covered. 

Property Owners’ Liability 

Another option is to take out property owners’ liability, which protects landlords against claims for personal injury if a tenant or visitor injure themselves while on your rental property. 

Want to know more? The new rules have a direct bearing on how you handle tenants — read our guide to evicting a tenant in East London and find out whether landlords can refuse pets under the incoming legislation.

What Is Not Usually Included In Rent Guarantee Insurance? 

• Commercial properties 
• Deferral periods (usually the first month of rent arrears) 
• Rental contract disputes 
• Rent after the tenant leaves the property 

Who Should Get Rent Guarantee Insurance? 

Rent guarantee insurance is worthwhile for any landlords who want to protect themselves against the financial impact of missed rent and legal costs associated with evicting tenants due to rent arrears. Landlords who have mortgage repayments to make for the property will have the peace of mind that they will be able to make the mortgage payments even if the tenant defaults on their rent. You can usually take out rent guarantee insurance for 6 months or 12 months. 

Is Rent Guarantee Insurance Worth It? 

When deciding whether to take out rent guarantee insurance, the biggest factor will be whether you prefer the safety net of guaranteed rent or you are comfortable taking on the risk and financial implications of missed rent payments. 

If you have a mortgage to pay for the property, would you be able to cover the payments without rental income for a period or would you face financial difficulty?  

Rent guarantee insurance also usually covers legal costs if you need to start eviction proceedings against a tenant who misses rent payments. Court fees and additional legal costs can run into tens of thousands of pounds. 

Survey data from the HCEOA revealed that evicting tenants through a County Court bailiff is costing landlords in London an average of £17,544 in lost rent and court fees due to the eight months waiting list. 

Here is a look at some of the main pros and cons of taking out rent guarantee insurance: 

If you have low risk tenants in your rental property and have cash reserves that could cover missed rent, then you may decide that paying an insurance premium is not necessary.  

However, if the worst-case scenario happened and you are drawn into a lengthy eviction process with several months of missed payments and court costs to pay, you could end up regretting the decision.  

What Affects The Price Of The Insurance? 

The key factors that affect the price of landlords’ rent guarantee insurance include: 

• Property size and location 
• Rental income amount 
• Tenant type 
• What is included in your policy, e.g. legal expenses insurance 
• Your chosen excess amount 

Landlords can opt to have a higher excess on their policy to reduce the policy premium. The most basic level of rent guarantee insurance starts from around £10 per month, increasing to around £100 for higher risk tenants and higher rental income. 

How To Get Rent Guarantee Insurance 

To take out rent guarantee insurance for unpaid rent, you will need to provide the insurance company with the following information: 

• Property size 
• Status of tenants e.g. students, professionals or retired 
• Location of property 
• Property type 

In addition, the insurer will require that you have carried out adequate background and credit checks on your tenants. 

Do Tenants Pass The Criteria For Rent Guarantee Insurance? 

Some insurers have strict criteria regarding which type of tenants they will provide cover against. For example, they may demand that the tenant’s gross monthly income is at least 2.5 times the monthly rent. Insurers may also decline cover if tenants have adverse credit history even if affordability checks show they can comfortably afford to pay rent. 

Want to find out more? It’s also worth understanding the updated rules on rent increases in East London and how a tenancy deposit dispute is handled.

What Are The Alternatives To Rent Guarantee Insurance? 

There are generally exclusions and strict conditions that need to be met when taking out cover with a third party rent guarantee insurance provider that covers unpaid rent. However, there are other options available that may be more suitable, such as: 

• Setting up a cash reserve – Landlords can put money aside to cover potential missed rent payments. 
• Use a tenant screening service – You can use a tenant screening service to perform comprehensive credit checks and reference checks. This doesn’t guarantee your tenants will reliably pay rent but it can reduce the risk of non-payment. 
• Have a strong tenancy agreement – A watertight tenancy agreement can help avoid disputes and make evictions smoother. 
• Use a letting agent management service with rent guarantee – Some letting agents offer a full management service which includes guaranteed rent or they offer a separate guaranteed rent scheme.  

You might want to consider taking out a rent guarantee which can cover missed rent payments and any legal costs if you are a landlord in Newbury Park, Ilford, Goodmayes, Seven Kings, Plaistow, Chadwell Heath, Barking, East Ham or beyond. Contact us today to find out how we can help protect you from financial losses, should your tenant default on their rent payment.