Protecting your rental income from the cost of living crisis
NRLA insurance partner Rentguard explain more about the support they can offer for landlords amidst the cost of living crisis.
Households face increasingly crippling costs, driven by the highest inflation in 40 years and soaring energy bills.
Many tenants are particularly vulnerable to rising costs. Of the six distinct classes of private renters defined in the 2019-20 English Housing Survey (EHS), based on differences in their financial and family circumstances, comfortable renters make up 44 percent of the PRS or approximately 1.94 million households.
Private renters are facing increasing fees
Even before increased costs due to rising inflation, it has been recorded by Citizens Advice that private renters spend more of their income on housing costs than homeowners. Rent prices are growing at the fastest pace in five years, outpacing many tenants’ salaries.
By the end of 2022, Hamptons International estimated the average rented household would spend a record 54 percent of their post-tax income on rent and household bills, which is an extra £4.6bn paid by tenants.
The squeeze on the cost of living could leave tenants struggling to pay rent and renters may prioritise eating and heating over rent.
Rental prices paid by private tenants in the UK rose by 4 per cent over the 12 months to November 2022, according to the Index of Private Housing Rental Prices published by the Office for National Statistics.
Rent arrears are an ongoing concern
Despite a landlord’s best intentions, there may be situations where a tenant slips behind on rent, leaving them in a potentially difficult financial situation.
Throughout the Covid pandemic, many landlords were doing all they could to keep people in their homes and once again, they are facing this struggle. But landlords are also experiencing rising costs, and if a tenant cannot pay rent there could be serious financial implications if they do not have a safety net, such as rent guarantee insurance.
Non-payment could go on for months with thousands of pounds in rent arrears built up, and any subsequent repossession and eviction proceedings can be drawn out affairs.
Looking at your options for protecting your rental income may help to avoid financial issues during these economically turbulent times.
How rent guarantee insurance can help during the cost of living crisis
Rent guarantee insurance can provide cover designed to help protect landlords from the financial losses that can occur as a result of tenants failing to pay their rent.
This insurance can typically cover rent arrears and legal costs associated with the eviction of a tenant who has not paid their rent.
Rent guarantee insurance can help landlords during the cost of living crisis in a few ways:
- By providing financial protection against unpaid rent, it can help to provide landlords with a financial backup if a tenant is unable to pay their rent.
- By covering the cost of eviction proceedings, it can help landlords through the process of evicting a tenant.
- By covering the cost of legal advice and representation, it can help landlords follow the correct procedures when evicting a tenant.
As can be the case with any insurance policy, landlords should carefully review the terms and conditions to ensure the cover is suitable for their needs.
When can landlords get rent guarantee insurance?
This policy is designed to be taken out at the start of the tenancy. However, it can be taken out at any point during the tenancy, but a 90 day exclusion period will apply. This means that the policyholder cannot make a claim for any risk events that occurred during the first 90 days from the start date of the policy. Any risk events that occurred before the start of the policy would also not be covered by this insurance.
During a period of rising costs, including increased mortgage rates, maintenance and repair expenses, it can help to protect your rental income if your tenant defaults on rent.
Financial help for issues related to tenant rent arrears
Rent protection insurance can also cover mediation services, a form of alternative dispute resolution (ADR). This involves a neutral third party, known as a mediator, facilitating communication and negotiation between two or more parties to resolve a dispute, such as unpaid rent.
Mediation can also be used as a first step in resolving disputes before going to court, or as a way to settle disputes after a court case has begun.
Eviction proceedings can also be costly, which is why this cover can also provide help financially if you need to recover possession of your property when your tenant fails to perform obligations set out in the tenancy agreement.
Following landlord legislation can be important for a successful claim
Landlords should also be aware they must be fully compliant with all the relevant rules and regulations affecting the private rented sector or any claim may be invalid. The rules are in place to help improve housing standards and tenant safety. For example rules surrounding deposits and how they are protected. Ensure you have secured the deposit under one of the Government's approved tenancy deposit schemes.
Help is at hand – get in touch with Rentguard
With vast experience of handling insurance policies for a range of landlords, and with relationships with some of the leading insurers, Rentguard aims to simplify your insurance arrangements, helping to protect you financially.
Get a quote online or speak to our specialist team on 0333 000 0169.
The sole purpose of this article is to provide information on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Rentguard and National Residential Landlords Association, an Introducer Appointed Representative of Arthur J. Gallagher Insurance Brokers Limited, accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.
National Residential Landlords Association is an Introducer Appointed Representative of Arthur J. Gallagher Insurance Brokers Limited, which is authorised and regulated by the Financial Conduct Authority. Registered Office: Spectrum Building, 7th Floor, 55 Blythswood Street, Glasgow, G2 7AT. Registered in Scotland. Company Number: SC108909. Rentguard is a trading name of Arthur J. Gallagher Insurance Brokers Limited.
