One of the most common questions we get asked about is Landlord insurance. Rent guarantee and legal cover is often available as an optional add on to ‘basic’ landlord insurance. It will cover you against your tenant failing to pay the rent for any reason. Even if your letting agent has had the best checks and references carried out, you can never predict a tenant falling on hard times, losing their job or becoming ill and then not being able to pay the rent.
When you let out property there is always a chance of the unexpected happening. Chasing tenants for unpaid rent or gaining possession of the property can be costly and time consuming. Whether you are a landlord with a single property or a large portfolio, if the worst happens and you have a legal dispute, rent guarantee and legal protection gives you peace of mind.
Rent arrears pose a huge headache for any landlord; not just the loss of rental income, but also the likely cost of expensive legal fees and charges to issue notices to quit, seek an eviction and attempt to recover the rent arrears.
Landlords legal protection and rent guarantee insurance are closely linked and that is why a combined policy provides landlords with protection against all the legal expenses that may be encountered as well as compensation for any rental income you may have lost.
If you are considering whether or not to take out rent guarantee and legal protection, here are a few things to consider:
Would you be able to cover your mortgage costs over a prolonged period of time if your tenants stopped paying the rent?
Policies vary widely. As a general rule, the rent guarantee insurance will cover rent arrears for a maximum of six months or until vacant possession has been secured (whichever is the sooner).
With some policies, 50% of the rent may be claimed for up to 3 months if property cannot be re-let due to damage caused by tenant.
Rent guarantee insurance may be arranged for any type of tenant – professional, employed, or self-employed however, most providers will require that the referencing has met certain criteria e.g. an approved credit reference, employment and financial references. Failure to do so will render any claim invalid.
Legal expenses during the eviction process can also run into the thousands – on average, it can cost £3,000 to legally evict a tenant.
These policies can provide real peace of mind and the full cost is tax deductible against your rental income.
As a result of the Covid 19 pandemic, many insurance providers no longer offer rent guarantee and legal cover so you will need to shop around if you want this type of policy. Alternatively, if your property is under full management, your letting agent may be able to offer you cover through specialist companies linked to their referencing provider.
As with most insurance policies, make sure that the policy you choose is through a good provider and we would always recommend that you speak to an expert rather than buying online. Hopefully this helps with your decision making but if you have any questions about the cover that Piccolo Property Services can offer you, please don’t hesitate to get in touch: