Guaranteed rent vs rent guarantee insurance: two very different safety nets

A lot of landlords tell us they are already covered because they bought rent guarantee insurance with their letting agent. It is a sensible product and we are not here to talk anyone out of it. But it solves a different problem to the one people think it solves.

How rent guarantee insurance works

You keep the tenancy in your name. If the tenant stops paying, you notify the insurer, you follow the process, and — if the claim is accepted — you are reimbursed, usually up to a monthly cap and a total limit, and typically after an excess period of a month or so.

• It only pays if the tenant passed the insurer's referencing at the start. Fail that and the policy is worthless.
• There is an excess period, so the first month or so of arrears is generally yours.
• There is a cap per month and a cap in total, often around six to twelve months.
• It covers arrears. It does not cover voids, damage beyond the deposit, or the months a property sits empty afterwards.
• You still run the eviction. The insurer funds legal costs; the stress, the correspondence and the waiting are yours.

How guaranteed rent works

There is no claim, because there is no tenant of yours to default. We take a lease on the property and become the paying party. The rent is a contractual obligation between us and you, paid monthly on a set date, in occupied months and empty months alike, for the length of the term.

• No referencing dependency, no excess period, no monthly cap, no claims process.
• Voids are covered by definition — an empty month pays the same as a full one.
• Management, cleaning, wear and tear and occupant issues sit with us.
• The trade-off is honest: the guaranteed figure is below top-of-market rent, because we are absorbing the risk and the running costs.

Which one you actually want

If you enjoy being a landlord, have a good agent, and want protection against a rare bad tenancy, insurance is the cheaper answer. If what you want is a number that arrives every month without you being involved in whether it arrives, insurance is not really the product you are after — it just looks like it from the brochure.