Rent Guarantee Insurance — Cover and Key Exclusions
Rent guarantee insurance (RGI) pays the landlord's monthly rent when the tenant defaults and covers legal costs of possession. Core cover: pays up to the policy cap (typically £2,500/month) for 12-15 months from the first valid claim; most policies include bundled legal expenses cover (£50,000-£100,000 sub-limit) for s.8 notices, possession orders, and enforcement. Key exclusions: (i) pre-existing arrears — if the tenant was in arrears before the policy was taken out or renewed, the claim will be declined; buy the policy before any arrears arise; (ii) failure to reference — most policies require a satisfactory professional reference (credit check, employment verification, previous landlord reference); failure to reference is the most common claim rejection reason; (iii) no written tenancy agreement — verbal tenancies and non-standard agreements are typically excluded; (iv) unlicensed HMOs — operating without a mandatory HMO licence may void the policy; (v) minimum tenancy period — some policies require the tenancy to have been in force for a minimum period before a claim is accepted. Post-Renters' Rights Act 2025: abolition of s.21 from 1 May 2026 makes all possession more complex and lengthy; RGI becomes significantly more valuable as the legal process is expected to take longer.
Personal Income Protection and Specialist Landlord Cover
Personal income protection (IP) pays a monthly benefit if the policyholder cannot work due to illness or injury: always buy own occupation definition (pays if you cannot do your specific job) rather than any occupation or suited occupation. Critical distinction: standard IP policies cover earned income — not rental income; if your only income is property rental, a standard IP policy pays nothing on incapacity. Specialist landlord IP treats net rental income as the insurable base; less common; specialist brokers (Alan Boswell, Cura) can advise. For full-time investors with no earned income: critical illness cover (lump sum on diagnosis of a specified critical illness) is the more accessible alternative; builds a cash reserve for a recovery period. Buildings and liability: landlord buildings insurance must specifically cover rental use (homeowner policies exclude it); mandatory for virtually all BTL mortgage conditions; minimum £5M public liability recommended for common parts and HMOs. Portfolio policies: 2+ properties; lower combined premium; single renewal date — review annually for accurate rebuild costs and rent levels.