What rent guarantee insurance covers
- Rent guarantee insurance (also called rent protection insurance) pays out when a tenant defaults on rent, typically covering the monthly rent for a defined period (usually 6�12 months, sometimes longer) while the landlord pursues possession
- Most policies also include legal expenses cover: the cost of instructing solicitors, issuing court proceedings, and attending hearings for possession claims, legal costs for a contested possession case can exceed �5,000��10,000
- Some policies include eviction cover (covering the cost of enforcing a possession order, including bailiff fees) and sometimes cover for damage caused by the tenant beyond the deposit
- The key benefit: rent guarantee insurance transforms an uncertain cash flow event (tenant default + potentially lengthy possession proceedings) into a predictable monthly income stream during the claim period
- Monthly premium: typically �15��40 per month per property, depending on the rent level, cover period, insurer, and tenant risk profile. Annual payment options are usually available at a discount
Key exclusions to understand before purchasing
- Pre-existing arrears: policies will not cover arrears that existed before the policy incepted. A tenant already in arrears when you purchase cover is not covered, rent guarantee insurance must be taken out at the start of the tenancy
- Referencing requirement: most policies require that the tenant was referenced and met the insurer's minimum referencing standard (typically income check, credit check, and previous landlord reference). A tenant who was not referenced or failed referencing is typically excluded
- Excess period: most policies have an excess period, typically the first one to two months of arrears are not covered, with cover commencing from month three. Factor this into your cash flow modelling
- Void periods: standard rent guarantee insurance does not cover void periods (the property being empty between tenants). Separate 'void period insurance' exists for this purpose
- Policy conditions during claim: most policies require that you actively pursue possession during the claim period. Insurers typically require court proceedings to be issued within a defined timeframe. Failure to comply can result in the claim being declined
How the Renters' Rights Act 2025 affects rent guarantee insurance
- The abolition of Section 21 (no-fault eviction) means that possession now requires a valid Section 8 ground. For rent guarantee insurance claims arising from rent arrears, Ground 8 (mandatory, 2+ months' arrears) remains available, policies structured around Section 21 possession are now obsolete
- Longer possession timelines: the post-RRA 2025 possession process (Section 8 claim, court hearing, possession order, enforcement) may take longer than the pre-RRA Section 21 process. Check whether your policy's claim period is long enough to cover extended possession timelines, 12 months' cover is now the minimum recommended
- Insurers are updating their policies to reflect the RRA 2025 changes. When renewing or taking out a new policy, confirm that the policy is structured around Section 8 possession claims and that the claim period is sufficient
- Pre-action requirements: the Section 8 possession process now includes mandatory pre-action steps. Some insurers assist with the pre-action protocol; confirm this with your insurer before purchasing
- Information Sheet requirement: the RRA 2025 requires that the Information Sheet (Form 1) is served on all existing tenants. Some insurers are linking coverage to compliance with the Information Sheet requirement, check your policy wording
How rent guarantee insurance claims work
- Notify your insurer immediately when a tenant falls into arrears, most policies require notification within a defined period (typically within 30�60 days of the first missed payment). Late notification can result in the claim being declined
- Document arrears: maintain a clear rent account (paid/unpaid by month) and copies of any communications with the tenant about the arrears. This is the evidence base for your claim
- Follow the insurer's instructions: the insurer's legal panel or case handler will typically manage the possession proceedings. Follow their instructions, deviating from the insurer's process (e.g. accepting a reduced rent payment agreement) can breach the policy conditions
- Claim payment: insurers typically pay monthly during the claim period, after the excess period. Some pay arrears in arrears (after the month ends); others pay at the start of the month. Confirm the payment timing when purchasing
- End of claim: the claim typically ends when possession is obtained and the property is re-let, when the policy claim period expires, or when the tenant clears the arrears. Some policies cover a re-letting period; check the policy wording
Choosing the right rent guarantee policy
- Claim period length: minimum 12 months recommended post-RRA 2025. Longer periods (18�24 months) provide more protection in complex possession cases
- Legal expenses limit: �50,000+ is recommended. Court costs, solicitor fees, barrister fees for contested hearings, and enforcement costs can mount quickly
- Referencing requirement: understand the minimum referencing standard required by the insurer and ensure your referencing process meets it. Some insurers will only cover tenants referenced through their approved provider
- Self-employed and benefit tenants: many policies explicitly exclude these tenant types. If your rental strategy involves self-employed or benefit tenants, find an insurer that covers them, specialist insurers exist for this market
- Compare on excess period, claim period, legal expenses limit, and whether the policy covers Section 8 possession on all grounds (not just arrears). Price comparison sites are useful but should be supplemented by reading the policy wording