Landlords are especially vulnerable to economic downturns. Even if they are careful to weather financial turbulence, invest wisely and always keep something to fall back on, their tenants may not be as sensible or as lucky. If someone loses their job, they may end up in arrears on their rent and despite their best intentions end up owing several months’ back payment. This is why it is vital that letting agents are offering their landlords a rent guarantee insurance, especially in uncertain economic times. As an insurance broker with years of experience within property insurance we explain reasons why rent guarantee insurance is a helpful product for property owners and letting agents.
Reasons to consider rent guarantee insurance
- Renters are at risk
Tenants are at risk of being unable to pay the rent if they lost their job. A report from the housing charity Shelter suggests that one in three working families wouldn’t be able to pay their rent or mortgage for more than a month if the main breadwinner became unemployed.
- Not everyone can claim housing benefit
It used to be the case that if you lost your job you could claim housing benefit to cover your rent until you got back on your feet. Now, however, an increasing number of people are ineligible for full housing benefit. This includes couples that rely on two wages to cover their rent. If one loses their job while the other is still earning, they won’t be able to claim benefits, even if the one wage is not sufficient.
- Housing benefit often isn’t enough
If a tenant is single and under 35, he or she will only be eligible for enough housing benefit to cover the cost of a single room in a shared house, even if the individual previously had a good job and was living in a flat or house. Similarly, housing benefit won’t pay an above average rent in a “nice” area, meaning your tenant may have to move out. In addition, if they’re judged to have a “spare room” they’ll be penalised under the “bedroom tax.”
- Rent guarantee insurance covers your costs
While landlord legal expenses insurance will assist you in pursuing a defaulting tenant through the courts for unpaid rent, you’ll still have no income from your property during this period. With rent guarantee insurance you’ll get the equivalent of the monthly rent with options up to £5,000pcm, meaning you can maintain your landlord’s rental payments, cover legal costs for regaining possession of your managed property and protect your management fee.
The impact of tenant referencing
In order for a tenant to qualify for rent guarantee insurance, they must pass tenancy referencing. This generally consists of three elements, however there can be additional variable factors for longstanding tenants, tenants with guarantors, or savings. Further details available on request.
- Affordability: The tenant must be earning two and a half times the monthly rent
- Credit check: The tenant must have no county court judgements (CCJs) or bankruptcies in the last three years
- Identification: The landlord must collect two types of identification and one of these must be pictorial.
We’ve got your back
If you have a rent guarantee insurance policy in place from Alan Boswell Group, we will actually cover the rent money you are due while your solicitor pursues the tenants for the money they owe. It can be purchased from just £135 and will pay out up to a maximum of £5,000 in rental income per month.
Our landlord legal expenses cover will also help you with the costs of pursuing a tenant who is in breach of the tenancy agreement. For both of these policies, we offer great value for money, and they really are invaluable should you suddenly find yourself without your rental income.
For further information, book a call with us here.
