Although the UK economy has recovered and unemployment figures have dropped, the prospect of a tenant losing their job remains at the back of every landlord’s mind. And while their landlord insurance policy may cover damage to the property, a standard policy won’t cover the loss of rent if a tenant defaults on a payment.
But there is a solution; if you haven’t considered taking out rent guarantee insurance before, or aren’t sure if it’s for you, here are the top five reasons we’d recommend it to any landlord:
- More renters are at risk
According to a recent report, more than five million working tenants are at risk of being unable to pay the rent if they lost their job. This figure has nearly doubled in the last decade (2m in 2003-04) and accounts for nearly three-quarters of all working renters. A separate 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.”
- Further cuts are expected
It seems likely that government policy will lead to further cuts in welfare, including housing benefit. At the same time, many fear that rising unemployment will be one of the long-term consequences of Brexit. A precarious economy means that the safety net for working people is increasingly threadbare and these risks are being passed on to landlords.
- 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 for up to 12 months or £25,000, meaning you can pay your bills and stay in business.
Obviously, the wider social issues need to be addressed, but in the meantime, landlords need to protect their own interests. In these uncertain times, rent guarantee insurance is something that anyone who lets out residential property should be considering.