Rent guarantee insurance, also called rent protection insurance or tenant default insurance, pays a monthly benefit when a tenant stops paying rent and you need to pursue possession through the courts. With Section 21 abolished from 1 May 2026, possession proceedings take longer and the financial exposure during arrears has increased. This makes rent guarantee insurance more relevant than at any previous time.
How it works
- Tenant stops paying rent. Arrears accumulate.
- You serve a Section 8 notice citing Ground 8 (3+ months' arrears), Ground 10, and Ground 11.
- After the notice period expires, you apply to court for possession.
- Once arrears hit the policy trigger threshold (typically after 1–2 missed payments, though policies vary), you can make a claim.
- The insurer pays a monthly benefit, typically up to the monthly rent, capped at 6 or 12 months, while proceedings continue.
- When possession is obtained, the policy ends. The insurer may also cover legal costs.
What policies cover
- Monthly rent benefit: Usually 100% of the contracted monthly rent, up to a monthly cap (e.g. £2,500)
- Duration: Typically 6 months of rent; some premium policies cover 12 months or until possession
- Legal expenses: Section 8 court application fee, solicitor costs for possession proceedings, bailiff fees, often bundled
- Eviction costs: Some policies cover court-ordered eviction enforcement
Referencing requirements
Most rent guarantee policies require you to have conducted a satisfactory tenant reference check before the tenancy started. If you accepted a tenant without referencing, or the reference was unsatisfactory and you took out a policy anyway, the insurer may refuse a claim. Check your policy's referencing requirements before you rent.
Standard referencing checks for rent guarantee purposes typically include:
- Credit check, County Court Judgements, bankruptcy, payment history
- Employment verification, employer confirmation of salary and contract status
- Affordability check, rent typically must not exceed 35–40% of gross monthly income
- Previous landlord reference, confirming payment history and conduct
- Right to Rent verification, confirming legal right to reside in the UK
How it interacts with Section 8 after the Renters' Rights Act
Before 1 May 2026, many landlords used Section 21 as the faster possession route when arrears accumulated, partly because the accelerated procedure avoided a full hearing. From 1 May 2026, Section 21 is abolished. All possession is via Section 8 with a full hearing, typically adding 2–3 months to the process.
This means the period between serving a Section 8 notice and obtaining a possession order is longer, and the rental income gap during that period is larger. Rent guarantee insurance that covers 12 months (rather than 6) is now more likely to bridge the full proceedings period.
What it does not cover
- Arrears that pre-date the policy start date
- Tenancies where referencing was not conducted or was unsatisfactory
- Self-managed disputes where you did not follow the prescribed Section 8 notice procedure
- Tenants who are in dispute about rent amount (rather than failing to pay), check policy wording on 'disputed' arrears
- Damage caused by tenants, this is covered separately under landlord buildings or contents insurance
Is it worth it?
For landlords with one or two properties, rent guarantee insurance provides meaningful protection against the financial damage of a non-paying tenant. The annual premium is typically equivalent to 1–3 weeks' rent. Given that possession proceedings from Section 8 service to warrant can now take 4–8 months, the potential payout during that period is significant.
For portfolio landlords, the calculation is different, with enough properties, the statistical risk of a simultaneous multi-property arrears event is low, and a portfolio-wide self-insurance approach may be more efficient.