What are the most likely reasons for rent protection to fail?
Rent protection is designed to help landlords with lost rental income. Here, Jack Vlasto, of NRLA insurance partner Rentguard explains more about the different types of rent protection, and which situations they might cover.
What types of rent protection are available?
One common form of rent protection is rent guarantee insurance. 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.
Other circumstances where you are not receiving a rental income may be covered by a landlord household insurance policy. For example, loss of rent cover can be included for situations where the property is uninhabitable due to an insured peril, during which time the tenant might not be expected to pay rent.
As can be the case with any insurance policy, landlords should carefully review the terms and conditions of their insurance policy to ensure the cover is suitable for their needs.
How common are rent arrears?
Rent guarantee insurance can help if your tenants face financial difficulties and are unable to pay rent. But how likely is this to happen? With rising prices due to the cost of living crisis, tenants missing rent payments could be a real risk that you might want to consider covering yourself against.
Figures from Uswitch show that the average UK tenant was spending 39.1% of their monthly income on rent in 2023. Add bills, groceries and other essential monthly expenditures on top of this and it can be easy to see why many people are struggling to make ends meet. Paragon Bank recorded in their Portfolio landlord report 2024 that 37% of landlords experienced late rent payments in the previous 12 months and 30% experienced rent arrears.
If you have to evict a tenant due to rent arrears or another reason, which 17% of landlords did in Paragon Bank’s report, you could be losing rental income for months or even a year or more, as shown by the figures below. Having suitable rent protection can help you through this period, helping to cover your rental income and the cost of legal proceedings during the eviction process.
As the statistics above might suggest, suitable rent protection such as rent guarantee insurance can be vital in today’s rental market. However, it can also be important to be aware of any terms, conditions and exclusions of your policy that might leave you at risk of not being suitably covered.
Examples of rent guarantee insurance conditions
One reason rent protection may fail is if your insurer deems that you are unlikely to win the case against your tenant, based on the specific circumstances and evidence related to the claim. Your claim would likely be assessed by an independent adviser, and if there is an equal or greater chance of you losing the case, then you may not be covered for the claim. This condition helps the insurer determine whether or not the claim is worth pursuing.
When you make a claim, rent guarantee insurance can cover you for rent owed by your tenants or their guarantors. However, there are certain criteria that must be met for a successful claim. For example, the policy wording may state that you must be insured when making the claim, the rent arrears must have occurred during the tenancy period, and the tenant must still be living in the property.
There may also be a maximum amount of rent you can receive as a result of the claim. For example, some policies state this can be for up to 6 months’ worth of rent. A policy may state a maximum amount payable.
Additionally, your insurance may only pay out after tenants are in arrears for a certain amount of time, so claims made for rent arrears for periods shorter than the specified time may fail. As an example, the policy may state that rent must be over 30 days in arrears before any claim payments are made. This could be relevant for landlords whose tenants pay rent weekly rather than monthly. In this case, tenants would have to miss more than 4 weeks of rent payments before a claim payment could be made by the insurer.
Examples of rent guarantee insurance exclusions
You may also want to check your rent guarantee insurance policy wording for any specific situations where you may not be covered.
As an example, it may state that there is no cover if the insured event began to occur or had occurred before you purchased the insurance. Claims may also need to be submitted to the insurer within a certain timeframe of the insured event occurring.
Rentguard Guarantee Insurance from Rentguard
With vast experience handling insurance policies for a wide range of landlords, and with relationships with some of leading insurers, Rentguard Insurance aims to simplify your insurance arrangements and help to protect your property, its contents, and your liabilities.
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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, 55 Blythswood Street, Glasgow, G2 7AT. Registered in Scotland. Company Number: SC108909. Rentguard is a trading name of Arthur J. Gallagher Insurance Brokers Limited.
