Glossary · UK
What is Rent Guarantee Insurance?
A landlord insurance policy that covers lost rental income if a tenant stops paying rent, often sold alongside legal expenses cover for the costs of pursuing arrears or eviction.
Full Definition
Rent guarantee insurance (sometimes called "rent protection insurance") is a policy that compensates a landlord for lost rental income if a tenant falls into arrears or stops paying rent altogether, typically paying out the contractual rent, up to a set monthly limit and for a maximum period (commonly six to twelve months), while the landlord pursues the debt or regains possession of the property. It is not a legal requirement, unlike buildings insurance which some mortgage lenders insist on, but many landlords take it out -- particularly those with a buy-to-let mortgage to service each month -- as protection against the financial disruption a non-paying tenant can cause. Most rent guarantee policies are sold with, or alongside, legal expenses cover, which pays the legal costs of serving a Section 21 or Section 8 notice and pursuing possession through the courts if a tenant needs to be evicted, since these processes can be slow and costly even where the landlord is clearly in the right. Insurers typically require the landlord to have carried out proper tenant referencing and right-to-rent checks before the tenancy started, and cover is usually tied to a specific assured shorthold tenancy agreement, meaning a new policy, or an extension, is needed each time a new tenant moves in.