Whether you are a landlord of just one property
or you have a letting business, rent guarantee insurance
could save you money if a tenant fails to pay their
rent. However, with so many different policies to
pay out for, is it really worth the money or should
you risk being uninsured?
In
today`s fragile economy nobody`s job is secure and
even your tenants are at risk of redundancy. They
may pay their rent on time every month whilst they
are employed, however, if they suddenly become unemployed,
they may have no choice but to miss their rent payments.
When this happens you still have your mortgage to
cover and if you had rent guarantee insurance this
would be paid.
What
Is Rent Guarantee Insurance?
Rent guarantee insurance covers two elements. The
legal advice and expenses part will cover you for
instructing lawyers to deal with the eviction process,
as well as any breaches of the tenancy agreement
or claims against yourself. The income protection
element will help to pay the mortgage if the rent
is not paid.
In
order to qualify for a rent guarantee policy you
will need to have a signed assured tenancy agreement,
as well as proof that the deposit is held in a secure
scheme. You will also need to have undertaken any
legal obligations, including having gas and electricity
safety inspections. Before your tenants take up
their tenancy you should have them fully referenced,
including credit, employer and previous landlord
checks. If a rent guarantor is used they should
also have references. You should be aware that some
policies will not pay out if it was set up after
the tenants were already in place.
When
you set up the policy you should decide
how much of the rent you need covered. It
will be cheaper to simply have enough to
cover the mortgage and the bills, rather
than having the profit element covered as
well. There will be an excess to pay if
you use the policy, so you need to make
sure that this is covered in the tenants
deposit. You should also keep an eye on
how long the term of the policy is for,
as it may become void if the tenants move
onto a rolling agreement.
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How
Does Rent Guarantee Insurance Work?
Your policy will start to pay out after the tenants
have missed one month`s rent and you can then start
the process of eviction. This will usually take
around three months and tenants are unlikely to
leave voluntarily before they have received the
legal documents. However, under the terms of the
policy you should continue to have the rent paid
to cover the mortgage.
However,
some policies may only pay out for a certain period
of time or up to a maximum amount. They might also
charge an excess, which is often the equivalent
of one month`s rent. Rent guarantee insurance might
not be for all landlords, but if you have high risk
tenants or you really need the income it generates,
then you should consider taking out a policy.
If
you are also buying other policies, for example
buildings and contents, some companies offer discounts
for bundles. However, some insurance companies are
better for one type of policy than for others, so
which
company is best for critical illness cover,
might not be the best choice for rent guarantee
insurance. As with all types of insurance policy,
you need to shop around and do your research to
make sure that you get the best deal.
