Renting out a property can be a fantastic source of income, but it also comes with its risks, especially when tenants default on their rent. This is where rent guarantee insurance becomes crucial—it provides landlords with financial security by ensuring a steady income even if the tenant falls behind on rent. Here’s why rent guarantee is a “no-brainer” for landlords, with or without a mortgage.

Why Rent Guarantee Matters

Even if you don’t have a mortgage to pay, rental income is likely part of your financial plan. When rent payments are missed, it can lead to a snowball effect: one month’s missed rent can turn into two, and before long, you’re facing eviction proceedings that could take months, during which no rent is coming in. This not only means potential financial loss but also:

  • Legal Costs: Evicting a tenant incurs court and legal fees that can quickly add up.
  • Property Damage: Tenants facing eviction may not care about property upkeep, and some may even cause intentional damage if they feel they have nothing to lose.

Without rent, you may end up with thousands of pounds in legal and repair costs, on top of unpaid rent. And if you do have a mortgage, the stakes are even higher, as missing mortgage payments could lead to pressure from your lender.

The Added Pressure of Mortgage Payments

Imagine needing the rent to cover your mortgage. Suddenly, your own financial stability is on the line. While you’re chasing unpaid rent, you still have to cover:

  • Mortgage Payments: Missing these can affect your credit score or worse.
  • Legal Fees: These need to be paid upfront to start eviction proceedings.
  • Maintenance Costs: Even with defaulted rent, basic maintenance is often necessary.

In this scenario, a rent guarantee policy can be a lifesaver, ensuring your rent is paid every month, regardless of tenant issues.

What is Rent Guarantee Insurance?

Rent guarantee insurance is a monthly policy that provides landlords with peace of mind. For a small percentage of your monthly rent, typically around 5%, you’re guaranteed to receive rent each month even if your tenant defaults. As long as the tenant is in your property, the insurance will cover the rent, so you’re never left without an income.

Legal Cost Coverage

On top of rent guarantee insurance, landlords can also take out legal cost cover, which typically covers up to £50,000 in legal expenses related to eviction. This addition can save thousands, as legal fees in eviction cases can be steep and unpredictable.

Example Scenario: How Rent Guarantee Works

Let’s say:

  • Monthly rent: £1,000
  • Mortgage payment: £600
  • Rent guarantee cost: £18/month
  • Legal cost cover: £12/month
  • Management fees: £60/month

In a scenario where a tenant falls into arrears for 2 months, you’d face:

  • £2,000 in unpaid rent
  • £1,200 in unpaid mortgage payments
  • Legal costs for eviction

If the eviction process drags on for several more months, unpaid rent could easily reach £10,000. With rent guarantee insurance, however, you would still receive your monthly rental income, allowing you to keep up with mortgage payments and avoid serious financial strain.

Why Rent Guarantee and Legal Cost Cover are a “No-Brainer”

For a small percentage of your monthly rent, you gain reliable income protection and avoid a lot of stress. Even if there’s property damage when the tenant eventually leaves, your rent has continued to come in, allowing you to reinvest in repairs and keep up with obligations. Your property manager can also keep things legal and compliant, ensuring the property is maintained as well as possible.

In short, rent guarantee and legal cost cover provide landlords with a solid safety net, helping them weather tenant issues with far less financial risk.