Landlord Rent Guarantee Insurance (RGI) Guide

Page contents

• What is Landlord Rent Guarantee Insurance (RGI)?
• “Rent Guarantee Insurance” (RGI) Vs “Loss of Rental Income” insurance
• Do I need Landlord Rent Guarantee Insurance? Is it worth it?
• The time I used RGI to make a Rent Arrears claim
• Do I qualify for RGI? Can any Landlord get Rent Guarantee Insurance?
• How much does Landlord Rent Guarantee Insurance cost?
• Landlord Rent Guarantee Insurance (RGI) Providers
• Is this better than Rent Guarantee Insurance? Maybe…
• Top tips for buying your Landlord Rent Guarantee Insurance

What is Landlord Rent Guarantee Insurance (RGI)?

In short, Rent Guarantee Insurance (RGI) / Rent Protection Insurance protects landlords against loss of rent.

The insurance policy is most commonly relied upon when tenants fall into arrears and default on payments (for whatever reason). If that happens, landlords can reclaim the loss of rent through their insurance (or at least a percentage of it, depending on the terms of the policy).

Most RGI policies include legal expense coverage, which can often be useful in these unfortunate circumstances. For example, if you’re dealing with a tenant that falls into arrears and refuses to vacate, legal expenses to evict the tenant can snowball, especially if matters escalate to court and bailiffs are required. Needless to say, an excruciating experience for landlords.

The extent of what and how much a policy will cover can vary by supplier. However, the following is generally included with most RGI policies:

• Rent coverage (minus an excess fee, like most claims)
• Legal costs coverage
• Legal helpline
• 50% of the rent paid, for up to 3 months after vacant possession has been obtained, whilst you find a new tenant

Yup, it’s easy to understand why this type of insurance policy can be incredibly alluring to landlords, and for all the right reasons.

“Rent Guarantee Insurance” (RGI) Vs “Loss of Rental Income” insurance

I can’t stress enough, please do not confuse RGI with “loss of rent insurance” (also commonly referred to as “loss of rental income protection”), as they usually provide different coverage, and if you get them confused you might be in for a rude awakening if you ever need to make a claim.

Many standard landlord building insurance include some form of “loss of rent insurance”, but it usually isn’t referring to RGI.

• Rent Guarantee Insurance (RGI): covers loss of rental income in the event of rent arrears (in other words, if a tenant stops paying rent, for whatever reason).
• Loss of Income insurance: covers loss of rental income in the event that the property becomes uninhabitable due to an insured event (e.g. fire, flood, explosion, vandalism etc.) and the tenant is forced to move into alternative accommodation.

It’s very unlikely your landlord insurance will include RGI by default (some providers do offer RGI as an optional add-on). However, it is likely for loss of income protection to be included. A common problem is, many landlords incorrectly presume they’re covered by a rent guarantee protection when what they’re actually covered by is loss of income (which isn’t relied upon or required anywhere near as much as RGI, hence why it’s often included), so it’s easy to understand how the confusion can be catastrophic.

Either way, before splashing out on RGI, it would be wise to examine your existing policy to find out exactly what is is you are covered for in terms of “loss of rent” protection. You might be pleasantly surprised.

Do I need Landlord Rent Guarantee Insurance? Is it worth it?

To clarify, no type of landlord insurance is currently a landlord legal requirement for UK landlords in England or Wales, not even Landlord Building Insurance (although, you’d undeniably be a giant fanny not to have it), let alone Rent Guarantee Insurance (RGI).

RGI is purely for pleasure. I mean that in an entirely literal sense.

So it’s not really a question of “needing“, but rather, “wanting“, or perhaps, “would your life would be better with it?”

Having been a landlord for over a decade now, I can say without any doubt whatsoever, that the bleakest times have occurred when dealing with unreasonable tenants that have fallen into arrears. Oh, believe you me, there’s no greater sight to behold than watching a belligerent cock-face tenant yielding their ability to send our anxiety levels to the moon. Many landlords that have been through it will be able to attest to that!

So I’d say that in most cases, landlords would be better off with RGI.

One of the toughest realities of being a landlord is that it’s literally impossible to find a tenant that is guaranteed to always pay rent on time every month. If such a mythical creature existed, bad tenants wouldn’t exist.

RGI is one of the few coping mechanisms we have available to get through the rent arrears shit-storm, and that’s precisely why so many landlords consider it an essential insurance policy.

I’ve been genuinely shocked by how quickly seemingly shining examples of perfect tenants quickly eroded into bottom-of-the-barrel, dead-beat, blood-sucking vampire. Fortunately, I can still cover my mortgage payments if my tenants default, but that hasn’t always been the case, and it’s certainly not the case for many landlords. Personally, I’d say RGI is pretty essential for landlords that rely on the rental income to stay afloat.

Alas, even the best intentioned tenants can fall victim to hardship (often through no fault of their own), which can result in agonising debt. So it’s not just a hedge against the bad actors. Bad luck does not discriminate.

In any case, allow me to explain when rent guarantee insurance (RGI) is particularly effective and useful for landlords (to help you decide whether it’s worth it for you)…

• New tenants
  One of the biggest concerns for landlords with new tenants is that they don’t really know how reliable they’ll be until they’ve proven their reliability, and that can take several months. Essentially, trust has to be earned (this works both ways, of course).

  In the meantime, we kind of just hope and pray that we did a good job referencing them properly, minimising our risks.

  Tenant referencing is crucial and it’s one of the best ways to separate the wheat from the chaff, but in reality, even the seemingly best tenants can result in terrible tenants. And moreover, circumstances can change overnight for even the best of tenants- that’s something referencing can’t do, predict the future.

  I’ve personally had problems with working professionals that had mouth-watering financial references. Point being, referencing will only give you part of the current picture, and not the outcome.

  So it’s always useful to have RGI for all NEW tenants, despite how appealing their references are. Once you’ve built a good working relationship with the tenant, you can always resist from renewing the policy once it expires. However, many landlords keep renewing the policy for extra peace of mind, because anything can happen in this turbulent economy. But the most effective time to get a policy- if you’re ever going to get one – is when you’re starting a new tenancy with a new tenant.

• If you rely on rent to make mortgage payments
  In an ideal world ALL landlords will have a sensible emergency contingency put aside, so if shit hits the fan there’s still enough to keep the lights on. However, in the real world, many landlords aren’t sensible; they basically live paycheque to paycheque, relying on monthly rental income to cover their monthly expenses. Some landlords are a little more sensible, and they can survive for a month or two before they start feeling the pinch.

  The problem is, when a tenant falls into arrears, rent payments usually come to an immediate halt for several months, especially if it’s a particularly toxic situation where court action is looming.

  If you’re one of those landlords that heavily rely on mortgage payments to stay afloat, RGI could be a very wise option for you. (But I’d also recommend building a contingency).

• Expecting turbulent times
  Sometimes, if you’re lucky, your tenant will telegram financial difficulties with subtle and not-so-subtle hints. For example, unusual payment patterns.

  In those circumstances, it might be best to get a RGI policy and cover yourself… just in case.

  Yup, it’s entirely possible to get RGI for new or existing tenants, so it’s not restricted for only at the start of new tenancies.

• If you simply don’t want to worry
  As said, RGI can be an extremely effective mechanism to alleviate stress, because the fear of not receiving rent isn’t as severe.

  If you’re willing to pay a premium for that extra reassurance, despite the fact you may have wonderful tenants (because ‘anything can happen‘), then RGI might just be the sensible option for you!

• DSS tenants
  Rightly or wrongly so, DSS/DWP tenants are generally seen as high-risk compared to any other type of tenant. Statistically speaking, they are more likely to fall into arrears, so RGI cover could be extremely useful in this situation.

  Be warned though, there are very few insurers that will provide RGI cover for DSS tenants, and they’re becoming sparser by the day, because of the risk they pose. However, some companies do provide cover for a hefty premium. Not really surprising, though.

  Personally, in this situation, I believe the premium is usually worth paying for (if you can get it, that is).

From my experience, most landlords don’t bother splashing out on RGI, and it’s usually because of the following reasons:

• They can’t get covered. Be warned, some insurers will NOT offer you cover if you don’t meet their requirements e.g. If the tenant doesn’t pass credit checks.
• They don’t want to pay extra for it
• They don’t know such insurance exists
• They’re willing to take a chance without it
• They genuinely believe they have good tenants that will never step out of line

But on the other hand, I know many landlords that do (and an increasing amount of landlords are catching on), and they thoroughly endorse the policy because it takes stress away. I guess it boils down to the individual landlord and how safe/protected they want to feel. Much like how some gamble on not having mobile phone insurance. For the record, I do have mobile insurance, and boy have I made use of it over the years.

To conclude, and to reiterate, it’s not really a case of “needing” rent protection, but rather, “would your life would be better with it?” (while taking into consideration the cost)

The time I used RGI to make a Rent Arrears claim

Okay, so I’ve covered when and why RGI can be so utterly useful, so perhaps the next and most logical step is to share my personal experience with RGI and how it proved to be invaluable for me. Or at least, worth £900.

My experience should provide you with a practical idea of how the claims process works and what you can expect (although, don’t be terribly disappointed by the fact it works exactly as one would expect an insurance claim to work).

Long and truly painful story short, I had to evict a tenant after she fell into arrears. The Lord knows I tried my best with her, but she tested my patience until the bitter end; endless lies, broken promises, and excuses. A common story. It was painful.

She defaulted on 2 months worth of rent, which cost me a little over £1,500. An amount I certainly didn’t want to part ways with. After I served her with a Section 8 eviction notice, thankfully she promptly vacated herself (it definitely could have got uglier). But obviously I was still in the hole; there was no chance she was going to pay her debt, that much was very clear.

Fortunately, I had taken out RGI with Homelet (they were recommended by my letting agent at the time), so I notified them of my dilemma, which resulted in the usual process of form filling in order to file a claim.

Approximately 3-4 weeks later I received a cheque for just over £900. So what happened to the rest of the £600?

Good question! Just like with traditional car insurance policies (and most other insurance types), I was subject to an excess fee. Unfortunately, mine was a whooping £600. Admittedly, at the time I was naïve to the fact, because I didn’t actually realise my excess fee was so high. But in all honesty, I was still elated by the fact I was able to recoup £900, and to be fair, after following a relatively easy claims process.

However, lesson learned!. I always get policies with little to no excess fees now (I actually do the same with my car insurance). I personally think the small premium to keep those nasty excess fees at bay is worth it.

Do I qualify for RGI? Can any Landlord get Rent Guarantee Insurance?

There are usually a few requirements that must be met in order to be eligible for RGI:

• A written tenancy agreement.
• Tenants must have passed an approved and comprehensive tenant referencing service (e.g. the tenant cannot have adverse credit). If a tenant fails, then in some cases RGI may still be available if they can provide a qualified guarantor, but it will vary by the underwriter.

How much does Landlord Rent Guarantee Insurance cost?

I’m assuming this will be the decision maker for most. It’s always about the money, right?

Like all insurance policies, RGI will vary by each policy, and depend on how much coverage you want. However, the average cost is approximately £180 per year.

Needless to say, it’s well worth shopping around for the best deals; it’s becoming an extremely competitive market.

In general, RGI is very reasonably priced considering the amount of protection it provides, and actually, I think a lot of landlords are surprised by how affordable it is.

Landlord Rent Guarantee Insurance (RGI) Providers

By no means is this a complete list of companies that offer RGI products to landlords, however, they are competitive, not to mention well rated and reputable suppliers. So they’re not bad options, in my opinion….

Landlord Rent Guarantee Insurance (RGI) Providers

Supplier	Rating	Term	Details	Price from
Supplier	Rating 4.9 Google Reviews	Term 12 months	Details Included Free 14-day no quibble cancellation Tenancies with up to £3,000 monthly rent guaranteed Up to £50,000 total cover No excess on claiming Free legal helpline for duration of policy Policy still valid if tenants change (subject to referencing and £20 admin fee) Requirements *Each named tenant must have passed OpenRent’s Comprehensive referencing within the last three months. This should be done before applying for RGI. You can order an OpenRent Comprehensive Reference online for £20. If the referencing passes, you can go onto purchasing the RGI policy online.	Price No excess fees £199Inc IPT	More details *Order OpenRent’s Comprehensive referencing first if required.
Supplier	Rating 4.9 TrustPilot Reviews	Term 12 months	Details Included Covers 100% of the rent until vacant possession** 75% Vacant possession for up to 3 months Covers up to £5,000 rental payments per month Up to £100k Aggregate for legal expenses and rent arrears in any one claim Repossession Recovery of Arrears Nuisance & Trespass Defence of Criminal Prosecutions Alternative Accommodation & storage cost New or Existing tenancies without any no-claims penalty period No excess on claiming ** Indefinite rental payments until vacant possession, except where the tenant provides a valid defence to the eviction in which case payments are capped at 12 months Requirements Each named tenant must have passed a LegalforLandlords Smart or Complete or an approved full reference from another supplier. This should be done before applying for RGI.	Price No excess fees £239Inc IPT	More details

Please note, I try my best to keep the information of each service up-to-date, but you should read the T&C's from their website for the most up-to-date and accurate information.

Is this better than Rent Guarantee Insurance? Maybe…

I was recently introduced to a sort of RGI product, only it’s so much more, that’s recently been launched by the online letting agent LettingAProperty.com (an awesome little company I’ve been working with for several years).

It’s not really an RGI product at all, but more so a complete landlord rent collection solution which includes the ultimate Rent Protection policy (among a butt-load of other gadgets).

I say a “sort of” RGI because it’s a little bit different compared to what I’ve been talking about. The RGI policy offered by LettingAProperty includes “rent on time”, which basically means you get paid rent on time even if your tenant doesn’t pay, without having to go through a claims process. You simply get paid on the date you’re contracted to get paid. See the difference [compared to RGI]?

Yes, it’s more expensive than regular RGI policies, but you’re getting so much more. Anyways, I think it’s a pretty awesome product, so I thought I’d throw some light on it, because it’s kind of a hidden gem…

Complete Rent Protection

Letting Agent	Rating	Term	Includes / Notes	Price
Letting a Property	Rating 4.8 Google Reviews	Duration 12 months	Includes / Notes Complete package This is for those that want complete peace of mind, from repairs & maintenance management to guaranteed rent on time (even if your tenant doesn't pay). Key features Tenant-find service Rent collection Rent protection / guarantee Repairs & maintenance management Eviction support Legal compliance & assistance Complete rent cover (Rent always paid to you on time - even if the tenant doesn't pay!) Complete rent cover (Rent always paid to you on time - even if the tenant doesn't pay!) Money-back guarantee - let you property in 28 days or get a full refund of your setup fee. More details More features included 2 x tenant references Deposit registration Digital Contract Maker Legal & eviction cover Rent payment recovery Property damage protection Criminal prosecution defence Contract disputes protection Deposit dispute assistance Repairs & maintenance management Recording and responding to property issues Obtaining competitive quotes Instructing contractors Monitoring progress Confirming job completion *Payment Options £149 upfront setup fee, and then either: Annual payment option (£240 saving): 4% rent + £1188 (equivalent to £99 per month) inc. VAT deducted from initial rent Monthly payment option: 4% rent + £119 per month (inc. VAT) deducted from monthly rent Portfolio landlord discounts available, ranging from 10-50% off monthly subscription fees. Book a call to discuss.	Price Discount available PER MONTH*4% rent +£99 Inc VAT FIRST YR TOTAL4% rent +£1327Discount included	Visit WebsiteBook a call to discuss£10 Discount Code: PIP10

Please note, I try my best to keep the information of each agent up-to-date, but you should read the T&C’s from the agents’ website for the most up-to-date information.

All-in-all, RGI is a wonderful product.