Rent guarantee insurance

A steady safety net for your rental income

Rent guarantee insurance is designed to protect landlords when a tenant stops paying rent. In a market where average rents are high and affordability is stretched, a missed payment can quickly disrupt mortgage schedules and cash flow. This cover can replace lost rent for a defined period and often helps with legal costs if you need to regain possession. It will not remove every risk, but it can reduce the financial shock and give you time to plan calmly.

Across Great Britain, landlord costs have risen and arrears are more common. Many renters now commit a large share of take-home pay to rent, and more landlords report payment issues year on year. At the same time, claims and legal expenses are increasing across the market, and policy terms are tightening to remain sustainable. This guide walks you through what the insurance includes, what it does not, and how to choose a level of cover that genuinely fits your property and tenancy.

We will be clear on price expectations. Some policies are priced as a percentage of annual rent, particularly in London where higher rents elevate premiums and risk. Others use flat-rate pricing and fixed caps. There are also waiting periods and eligibility checks you must meet before a claim can be accepted. By understanding these moving parts now, you are better placed to decide whether rent guarantee insurance is appropriate for your situation and how it sits alongside your landlord building, contents, and liability covers.

Insurance can help, but only when you know what is covered and what is not.

Premiums are typically tax-deductible against rental income.

What is covered and how it operates in practice

Most policies cover missed rent when a tenant defaults, subject to monthly limits and an overall claim cap. Many include legal expenses to serve notices, handle court proceedings, and manage possession. Typical policies cover six to twelve months of missed rent. For example, if a tenant stops paying in month four, a policy might pay the monthly rent up to the cap for the next six months while legal steps progress.

There are important limitations. Cover usually begins only after the tenant has passed referencing and the policy has been in force for a set period. Most insurers exclude pre-existing arrears and may exclude certain tenant categories, such as students or tenants receiving benefits, unless specific conditions are met. A waiting period can apply before payments start, and you must continue to follow the insurer’s instructions on arrears management and legal procedures.

A straightforward claim typically looks like this: you notify the insurer of non-payment, provide the tenancy agreement, referencing documents, proof of rental schedule, and arrears records. The insurer may instruct a legal firm to issue the correct notices and represent you in proceedings. Payments are made monthly in arrears, up to the policy limits, until the tenant resumes payment, vacates, or the maximum cover term ends. If the tenancy or referencing does not meet the policy criteria, a claim may be declined. Clear documentation and timely reporting are essential.

Who benefits most from this cover

This insurance is most useful for landlords who rely on rent to service a mortgage or cover key costs such as service charges and maintenance. It is also valuable for London and other high-rent areas where a single missed payment represents a larger sum, and for landlords with limited reserves who prefer predictable cash flow during disputes or possession actions.

Portfolio landlords and letting agents may find it helps standardise risk across multiple properties and reduce administrative pressure when arrears arise. By contrast, cash-rich landlords with long-standing, low-risk tenants and strong savings buffers may decide the premium is not necessary, or they may choose a lower level of cover with stricter caps. The right decision hinges on your risk tolerance, tenant profile, and how quickly you could absorb several months of unpaid rent.

Choosing your cover level and add-ons

1. Basic cover

   • Covers missed rent for up to 6 months with a modest monthly cap.
   • Often excludes higher-risk tenant categories and may have a longer waiting period.
   • Suitable for low-risk tenancies with strong references and savings buffers.

2. Standard cover

   • Covers missed rent for 9 months, with higher monthly limits.
   • Includes legal expenses for notices, court hearings, and possession.
   • Balanced option for most single-let properties with typical risk profiles.

3. Enhanced cover

   • Covers missed rent for up to 12 months, with the highest caps.
   • Strong legal support, potential cover for eviction-related costs beyond basics.
   • Useful in high-rent areas where longer court timelines increase exposure.

4. Optional add-ons

   • Rent recovery beyond court order if arrears remain after possession.
   • Alternative accommodation or vacant property protection after eviction.
   • Excess waiver options to reduce out-of-pocket costs when claiming.
   • Flat-rate pricing options where premium does not scale with rent level.

5. Policy features to compare

   • Waiting period length and when payments start.
   • Tenant types allowed and referencing standards required.
   • Monthly cap, total claim limit, and any excess per claim.
   • Whether renewal terms change after a claim.

Price expectations and what shapes your premium

Are you eligible and what insurers require

Eligibility usually depends on a clear, compliant tenancy and robust referencing. Insurers commonly require an assured shorthold tenancy or relevant Scottish equivalent, a signed tenancy agreement, proof of deposit protection where applicable, and full referencing for every named tenant and guarantor. Referencing frequently includes credit checks, affordability assessments, and verification of employment or income.

Policies rarely accept applications where arrears already exist. Many exclude certain tenant categories or require a guarantor to be in place. Shortcomings in documentation are a common reason for declined claims, so keep full records of rent schedules, communications, and arrears notices. Expect a waiting period before cover responds. If you self-manage, be ready to follow the insurer’s arrears process precisely. Letting agents may coordinate these steps, but you remain responsible for meeting policy conditions.

From quote to claim in simple steps

1. Gather tenancy agreement, deposit details, and full tenant referencing.
2. Get quotes for several cover lengths and monthly caps.
3. Check exclusions, waiting periods, and tenant type eligibility carefully.
4. Choose a cover level that matches rent, risk, and savings buffer.
5. Buy the policy and store documents and claim contacts securely.
6. Monitor payments and record any arrears from day one of non-payment.
7. Notify the insurer immediately and follow their legal process guidance.
8. Submit documents promptly and track payments against the policy cap.

Benefits, limitations, and balanced considerations

Key checks before you purchase

Before buying, read the schedule and policy wording closely. Note any excess per claim and whether payments are made monthly in arrears. Confirm the maximum monthly payout and total claim limit, and compare these against your actual rent. Check the waiting period and the steps you must follow when rent is overdue. Review tenant eligibility rules and whether guarantors are required. Ask how renewal pricing is handled after a claim and whether terms change if arrears increase across the market. Keep copies of your tenancy, deposit protection, referencing, rent ledger, and all communications, as you will need them if you claim.

Alternatives and related products

1. Landlord building and contents insurance - Protects the property and fixtures, not missed rent. Essential alongside any rent cover.
2. Legal expenses insurance - Standalone option for possession and disputes if you self-fund lost rent.
3. Rent guarantee with guarantor - Using a strong guarantor can enhance eligibility and reduce risk.
4. Tenancy deposit protection and rent in advance rules - Compliance reduces disputes; note restrictions on advance payments.
5. Emergency landlord cover - Helps with urgent repairs to keep the tenancy stable but does not replace rent.

Frequently asked questions

Q: How much does rent guarantee insurance cost in London? A: Many policies price at 3% to 5% of the annual rent. On a £2,000 per month tenancy, that is roughly £720 to £1,200 per year, depending on limits and tenant eligibility.

Q: How long will the policy pay if my tenant stops paying? A: Typical cover is six to twelve months, paid monthly up to a cap. Payments stop when the tenant resumes paying, leaves, or the maximum term is reached.

Q: Are legal fees included? A: Many policies include legal expenses for notices, court action, and possession, subject to limits. Check whether advocacy and enforcement actions are included and the cap on legal costs.

Q: Will the policy cover students or tenants on benefits? A: Often not, or only with extra conditions such as a guarantor. Always check the tenant categories allowed and any extra referencing required before you buy.

Q: Is the premium tax-deductible? A: Premiums are usually deductible against rental income for tax purposes. Keep invoices and policy documents and seek tax guidance if you are unsure about your circumstances.

Q: What if eviction rules change? A: Regulatory changes can affect timelines and arrears exposure. If eviction thresholds or procedures extend, longer cover terms and robust caps become more valuable.

Q: Can I buy cover if arrears have already started? A: No. Existing arrears are almost always excluded. Policies must be in place before non-payment begins, and waiting periods often apply.

What to do next

Take stock of your rent, mortgage, and reserves. Decide how many months of missed payments you could absorb. Compare a few policies with different caps and cover lengths, and check tenant eligibility carefully. If the terms and limits align with your risks and budget, proceed. If not, consider legal expenses cover alone and strengthen referencing.

Important note

This guide is general information, not personal financial advice. Policy terms, exclusions, and pricing vary by insurer. Always read the policy wording and schedule carefully and confirm details with the provider before you buy or renew.