Rent guarantee insurance; a necessary policy as the cost of living rises?

Inflation is the highest it’s been for 30 years, and rising prices are pushing more and more households towards a cost-of-living crisis. From rising food and fuel prices to increased Council Tax and some National Insurance contributions, incomes are being stretched to a point that we haven’t seen in a long time.

In fact, a recent Which? survey revealed that an estimated 2.5 million British households missed essential payments in January this year. Just over 9% of people failed to pay their mortgage, rent or credit card bill, compared to 6.1% in December 2021. January’s figure is also higher compared to the same time last year where 7.9% of people admitted defaulting on key payments.

It’s not just the current cost of living that households have to battle with, it’s what’s on the horizon too. Which? also found that 42% of people thought their finances would get worse. That’s perhaps not surprising as a recent House of Commons briefing suggested inflation would rise even further, reaching a peak of 8.1% by Q3 this year.

Unsurprisingly, wages have failed to keep up with the cost of living and have been left trailing behind. Plus, let’s not forget the increasing uncertainty over the stability of gas and electricity prices, which rose by 28% and 19% respectively in the year to January 2022.

Landlords are not exempt from feeling the squeeze on household finances; rent prices are said to have increased by 8.6% as landlords are forced to increase rent to protect their own income. But this is of little use if tenants are unable to afford the increase. All of this is likely to culminate in some tenants struggling to pay their rent.

Here we look at how landlords and letting agents can protect their rental income, even when tenants default.

How can landlords and letting agents protect their rental income?

Missed rent payments can be devastating for everyone involved. Tenants who have never defaulted can suddenly find themselves in an uncomfortable and embarrassing situation. For landlords relying on income to cover mortgages, living expenses, wages, and commercial overheads, it’s a shortfall many simply can’t afford. For letting agents who receive a fee for managing the property, the impact of non-payment of rent can impact their income, as well as creating extra paperwork and admin required to recover the property.

Landlords and letting agents will undoubtedly be as flexible as they can, but once a tenant has missed two payments, they may have to make the difficult decision to evict. That’s where rent insurance can help.

Policies cover lost income if tenants miss rent payments and legal costs whilst a landlord is going through the process of evicting a tenant and regaining possession of the property. This includes expenses associated with issuing eviction notices, as well as professional advice and expertise. Not only does this mean continued income for landlords that rely on their rental properties, letting agents and landlords save valuable time when it comes to making sure notices are properly issued.

Rent guarantee insurance in detail

In the current climate, rent guarantee insurance could prove to be a hugely important component of protecting a property investment. Particularly as landlords can now expect to lose thousands of pounds to regain possession of their own property. In comparison, rental guarantee insurance starts from just £160 for 12 months (when purchased with landlord insurance) – a relatively small price to pay for peace of mind.

As well as financial protection, our rent insurance includes a 24/7 legal advice helpline. Rent guarantee can be added to existing landlord insurance policies and aren’t limited to new or renewed tenancies.

Our policy, in association with Aviva, is one of the most flexible on offer, giving policyholders broad coverage at competitive prices. Designed with landlords and letting agents in mind, policy benefits include:

• Independence from reference providers so you can choose the provider that works best for you;
• A dedicated in-house claims team for personal and consistent service;
• 15 months’ worth of rental payments covered (up to the point of vacant possession), plus 75% of rental income for up to three additional months after eviction;
• Zero excess;
• Flexibility on underwriting;
• Mid-tenancy policies accepted;
• No Covid-19 exclusions.

To find out more about rent guarantee or any of our other award-winning insurance products, contact us on 01603 216399.