Rent guarantee insurance for landlords
Taking out insurance that covers the bills when a tenant in a letting property fails to pay the rent on time is a must for many landlords. Rent guarantee insurance covers monthly rent due and legal costs for a landlord chasing a tenant for arrears.
Like most insurance, rent guarantee cover has terms and conditions; many insurers impose a six month limit on pay outs as they consider finding and moving in new tenants can easily take place in that time. Other insurers cap the monthly pay out to a maximum rent amount or charge an excess for each claim.
Landlords wanting to claim off their rent insurance need to make sure they follow a short checklist that means they are eligible for the cash:
Check out your tenants can afford to rent: The insurance firm will want to see that landlord took references before signing up the tenant to an assured shorthold agreement. Taking references means speaking to the former landlord and checking out an employer or accountant to make sure any prospective tenant can afford to rent.
Bad credit risks: In many cases, the insurer will also want to see a credit check for the tenant. These are cheap and easy to get from one of many online tenant reference agencies, providing you have authorisation from the tenant.
Money laundering rules: Letting agents in particular, but landlords in general, should make sure that they identify tenants by verifying personal identification, like a passport or driving licence. Don’t forget referencing the tenant means both if they are married or living together.
It’s also important to reference the tenant yourself or to pay your letting agent to carry out the checks. Asking the tenant to give you references may mean you do not get to see the whole picture, or even worse, the references are forged.
Asking the tenant to give you references may mean you do not get to see the whole picture, or even worse, the references are forged.
Several insurance companies offer rent guarantee cover. Some offer standalone policies just for this purpose, while others bundle rent cover in with landlord building and contents insurance.
Costs vary, but expect to pay from £10 to £20 a month for rent guarantee insurance cover, depending on the rent charged for the property. Portfolio policies are available through some insurance brokers and direct from specialist insurers.