Rent guarantee insurance is a type of insurance offered in the UK and in several other countries that helps to protect the income of the landlord. This should be viewed as distinct from renter’s insurance, which could be used to cover property losses for those who are tenants, since home insurance possessed by landlords doesn’t tend to cover renters’ personal property. Instead rent guarantee insurance can help a landlord who must evict someone for non-payment, or who loses payment required to continue to pay on a mortgage or rely on as income.
There are many companies in the UK that offer rent guarantee insurance and the structure of repayment or financial terms may differ depending on size of policy. Property owners might expect some help with the legal fees required to evict a tenant, and they might get full repayment of rent if a tenant has a financial difficulty, such as suddenly becoming employed. Amount of time rent is paid or amount of money allowed for eviction costs should be defined by the policy.
Companies that offer rent guarantee insurance often ask landlords to provide information about a tenant when he or she moves into a flat or apartment. They may ask the landlord to perform a credit check, and to verify the person is employed and that income is as stated. This helps minimize loss for both the landlord and the insurance company. Failure to verify a steady income and credit history risks the possibility that a tenant will not be able to pay rent.
One thing that rent guarantee insurance may do is help landlords protect their tenants, who through no fault of their own might lose means of employment. Many landlords are not anxious to evict tenants who have suddenly lost work through no fault of their own. They may feel a moral obligation to help support these tenants and give them time to get back on their feet, instead of evicting them because they are so in need of rent payments. Rent guarantee insurance allows landlords to make what might deemed the moral choice since their rent payments are guaranteed by their policy for at least a few months.
The other positive element to rent guarantee insurance is that it’s usually not very pricey, and might only amount to about 5% or less of total rent revenue. Especially in economies that are uncertain, this form of coverage may be attractive. However it is not available in all countries.