Is Rent Guarantee Insurance worth the paper it's written on?

Reasons for Landlords to Buy Rent Guarantee Insurance

Some may recall those turbulent Covid months where life became uncertain and rules changed from day to day.

One such sector affected was the private rented sector, with the courts closing, arrears mounting and possession of properties off the agenda.

Of course some wise Landlords had for years been purchasing Rent Guarantee Insurance to protect them in the event that their Tenant stopped paying the rent but sadly, these policies in reality didn't pay out as they are known to during Covid times, based on these changes to the courts, extended notice periods and stays on evictions. And of course the policy is based on being able to gain vacant possession i.e. an end stop date when the insurance could stop payment and that ability was removed. More importantly, providers had to withdraw cover as all that the cover was based on was up in the air and at that point the world looked uncertain and no-one knew how long these measures and this pandemic would last.

So moving on to 2025, 5 years since the Covid pandemic, what does the world of Rent Guarantee Insurance look like now?

Well to start with it is back on the market and available for Landlords to purchase but is it worth the paper it is written on? What does the Landlord actually get when he buys this policy and will it help the Landlord during turbulent times when a Tenant fails to pay their rent?

I spoke with Mike Dawson, who is Head of Sales at Barbon Insurance Group powering HomeLet and Let Alliance, two leading brands in this space . He told me about the what is available to a Landlord in today's market, how they can obtain it and why it is important that they should consider taking such cover.

Mike said ‘Rent Guarantee has never been more important than it is today’ is a line I hear in conversations with Letting Agents and their Landlords up and down the country week in week out. Why? Since Covid the risk of claim has only increased, with court delays mounting and now with the upcoming renters rights bill only around the corner; it is essential that Landlords assess their risk and mitigate it. Professional Letting Agents have never been more important; the sheer amount of legislation that a landlord is expected to follow is frightening, and Letting Agents will provide such value in protecting Landlords from breaching these legislative responsibilities, amongst other things. Another important other value added service is those Agents that provide rent protection through their management of the landlords property, can handle the process of claim and the Landlord can rest easy knowing their rent is being paid into their account as they would ordinarily expect. By the end of this year, we will have more than doubled our rent guarantee book, a business that has been providing such protection for over 20 years. The question Landlords and Agents should ask themselves is what happens when it goes wrong and I don’t have my rent for 12+ months, I have to continue to pay my mortgage, my insurance and other responsibilities, I also have to pay the legal fees to regain possession of the property. As an Agent I am more involved at this point than at any other time, but I won’t be getting paid any fees, because there is no rent to collect. Why take this chance?

In essence Rent Guarantee, however it is purchased and what ever product is chosen provides the following assurances to Landlords.

1. Financial Security

Rent guarantee insurance provides landlords with a safety net by ensuring that they receive rental income even if tenants fail to pay. This can help maintain cash flow and cover mortgage payments or other expenses associated with the property.

2. Protection Against Tenant Default

In the event of tenant default, rent guarantee insurance can cover the unpaid rent for a specified period, typically ranging from several months up to a year or more depending on the policy and underwriter.

3. Legal Expenses Coverage

Many policies include coverage for legal expenses incurred when pursuing evictions or recovering unpaid rent. This can save landlords significant costs associated with legal proceedings.

4. Peace of Mind

Knowing that there is a safety net in place allows landlords to feel more secure about their investments, reducing stress related to potential tenant issues.

So perhaps Rent Guarantee is worth the paper it is written on? Would you go on holiday without holiday insurance? Would you drive your car without having insurance? Just because Rent Guarantee is optional doesn't mean it isn't a sensible product to have in your armory.