The ongoing financial upheavals throughout Europe are a major concern for real estate owners especially those who own rental houses. One question every landlord in the United Kingdom should ask themselves is, do I need rental guarantee insurance? Most landlords of course may answer yes to this fundamental question, but may lack substantial reason to support this answer. Therefore, it is important to discuss various reasons that make taking rental guarantee insurance, a wise decision that every landlord should implement. There are those who urge that, that taking the rental insurance guarantee is unnecessary expenditure which can be avoided by appointing efficient agents to manage rental houses and rent collection on behalf of the landlord. There is nothing far from the truth than this escapist ideology.
Making sure you choose the right property to invest in is one thing, but ensuring you choose the right tenant can be a different issue entirely. That’s why Total Landlord Insurance recommends taking out rent guarantee insurance; where in the case a tenant fails to make a rent payment on time, you’ll be fully protected. In a period where finances are unstable and unemployment becomes a common issue, the idea of taking out rent guarantee insurance is quickly proving to be an appealing option amongst the landlord community. Even if your tenants have undergone the most rigorous of referencing checks, in this time of economic uncertainty anything could happen – such as a tenant being made redundant, which in turn affects their ability to pay their rent on time.
First, the rental guarantee insurance protects the landlord from the loss of income due caused by fail by tenant to pay rent. The landlord is compensated by the insurance provider, tenant’s arrears according to the amount of rent guarantee that is insured. This policy also covers the legal cost which the landlord may incur in pursuit of collecting rent arrears from defiant tenants. Therefore, it is apparent, that taking rent guarantee insurance, cushions the landlord income flow from disruption caused by errant tenants. Furthermore, it provides the landlord with adequate financial power to pursue legal measures aimed at collecting rent from difficult clients. It is important to note that civil cases such as those involving tenants and landlords can cause a lot of financial strain; hence having an insurance cover against such a costly risk is quite commendable.
Rent guarantee insurance, sometimes known as rent protection insurance, can offer a financial lifeline to many landlords. The policy covers the rent if your tenant defaults, though there are limits to most policies, so it is essential to read the small print. You can usually buy cover for six or 12 months, depending on the length of your tenancy agreement – and the full cost is tax deductible against your rental income. The cover will usually pay up to a certain amount per claim. For example, you might be able to claim for up to £2500 a month up to a maximum of £15,000, or until the tenant is evicted. You can usually put in a claim when the tenant is one month in arrears. However, you cannot normally make a claim within 90 days of setting up a policy. In other words, if you want to take out rent guarantee insurance, it’s better to act sooner rather than later.
It is also important to note that even your best tents may encounter serious difficulties which may lead to failure to pay rent due to issues that are difficult to avoid and unexpected such as illness or dismissal from employment. When such a scenario happens, the landlord may go for months without rent as the tenant tries to sort out things. This can be very problematic especially when there are mortgages to pay. It can lead to loss of property or create a very serious financial strain to the landlord. However, with a rent guarantee insurance policy, you do not need to worry about such an eventuality happening. It would also ease your support for excellent tenants that you may have had a very good and long relationship if they encounter problems which may limit their ability to pay rent.
It is every landlord’s worse nightmare: A tenant who can’t, or won’t, pay the rent. But many people with property owner insurance may be disappointed to find that unpaid rent isn’t covered.
Most landlord insurance policies include buildings and contents, liability cover, emergency assistance and legal cover, which pays out if you need to take tenants to court to evict them.
Some policies also include ‘rental cover’ but this doesn’t mean it will pay out if their tenant falls into arrears. In most cases it only reimburses lost rent for periods when a property is uninhabitable because of another insured event such as a fire.