What is Landlord Rent Guarantee Insurance?

If you are renting out your property, standard home insurance may not be enough to protect you and your property. Landlord insurance is a specialist type of insurance that covers the building and contents of the landlord and protects the rental business. It helps landlords by providing rent guarantee insurance. One thing for which this insurance does not offer cover is your tenant’s stuff. You must require your tenants to get tenant insurance because it will benefit tenants and landlords in many cases. 

Loss of rental income is one of the significant risks that landlords may have. So let’s see how you can protect yourself from this risk.

Rent Guarantee Insurance

Rent guarantee insurance is also known as rent protection insurance or tenant default insurance. It is a common type of coverage that you can add to your insurance policy. It protects the landlords from severe financial losses if tenants are unable to pay their rent. No matter how strictly you screen your tenants, even the most reliable tenants sometimes experience difficult financial situations resulting in rental income loss. It can take a long time, usually 42 weeks, to evict tenants. During this time, landlords are not able to get monthly rental payments. 

What Does Rent Guarantee Insurance Cover? 

Some landlord insurance policies include rent guarantee insurance as standard, but you have to add it as additional cover with some policies. It provides rent protection for specific periods that may vary from insurer to insurer. Typically it covers you for six months to a year. A rent guarantee insurance can also cover:

• Legal costs are required to resolve any disputes related to the recovery of rental arrears, eviction process or repossession.
• Access to the solicitor’s panel to get legal advice on a wide range of services, not only rental issues. 

Different insurers may offer different limits on the amount of coverage that you can get. You can choose one that you find best for you. 

 What Is Not Covered By Rent Guarantee Insurance? 

It is vital to read your insurance policy thoroughly to find exclusions. Some common exclusions are as follows:

Deferral Periods

You are not able to make claims for a specific period after taking out insurance. Also, you are not covered for the first month of the tenant’s default. You should check your policy to know the deferral period. 

When Selling Your Property

If at any point you decide to sell your property instead of letting it out and finding new tenants, your rent guarantee insurance will stop paying. 

Contract disputes 

You are not covered for any legal expenses if you have any disputes with your tenants over the terms of your tenant contract. 

Types Of Tenants

Some insurers exclude certain types of tenants such as students, unemployed people. It is because such tenants have a high risk of default. Therefore, you should avoid renting out property to such tenants. 

Commercial Properties 

Properties that are used as business premises are not covered, and you have to take out another cover. 

The Defaulting Tenants Leave 

If you manage to evict your defaulting tenants or they willingly leave your property, your payments from rent guarantee insurance will end. 

The cost of rent guarantee insurance depends on a number of factors such as type of property, location of property and type of tenants. Therefore, you must shop around to find the best insurance policy and read the policy terms carefully to avoid any inconvenience.

If you are going to rent out your property, you will need landlord insurance to protect your property against any damage or unforeseen circumstances. Standard home insurance may not provide the cover that you need for your rental property. Those who are new to being a landlord may not realise how a particular insurance policy can protect their building and content. Luckily there are several insurance options available in the market to protect the landlord’s property and income. Many landlords take a deposit from their tenants as security. This deposit needs to be protected through landlord deposit insurance schemes offered by the government. Landlords can charge the cost of damage from this deposit at the end of the tenancy.

There are three main types of insurance are available in the market that you can take as a property investor:

• Landlord insurance (building, content, and liability insurance)
• Rent Guarantee insurance
• Landlord emergency cover

In the long run, landlord insurance protects you from paying out large amounts in case of accidents. Now let’s look at the reasons why you need landlord insurance:

Building Cover 

Your property is one of your most significant assets, as you have invested thousands of pounds on it. Therefore, it is necessary to protect this asset, especially when you are renting it out. Landlord building insurance would protect the structure and built-in items such as kitchen boilers. If a disaster strikes, this insurance covers the cost of damage, and you would have peace of mind by purchasing this type of insurance.

Content Insurance

When you are renting a furnished property, you may need a cover for furniture, carpet etc. You can add content insurance to your landlord insurance to protect your possessions from any damage. Content insurance will cover the cost of repair in case of damage, and some insurers offer replacement costs in case of theft.

Covers Loss Of Rent

Loss of rent is one of the worst things that could happen to a landlord. Suppose a disaster strikes, such as a flood and makes your property unlivable. You can no longer rent your house until the damage is repaired and the property again becomes able to live in. landlord insurance can be a hope for landlords in distress. It provides you rental income for a particular time in case of any disaster or when your tenant fails to pay rent on time.

Landlord’s Liability Cover 

It is the responsibility of the landlord to provide his tenants with a safe environment. In case a tenant got injured due to a flaw in your property, you will be held responsible for the medical expense. These claims can hit your pocket badly. A landlord’s insurance also covers the compensation cost and legal fees.

Malicious Damage

Deliberate and accidental damages are the real concerns of landlords when handing over keys to tenants. Malicious damage can be detrimental to your rental income. However, with insurance for your rental property, you can get a cover for the cost of replacement or repair of things that are damaged maliciously.

Although landlord insurance is not a legal requirement, you should purchase one if you want protection for your property against damage and in an emergency.