Landlord Rent Guarantee Insurance (RGI) Guide & Why Landlords Need it

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What is Landlord Rent Guarantee Insurance (RGI)?

Rent Guarantee Insurance (RGI) protects landlords against loss of rent. It’s also known as Legal Expenses & Rent Guarantee Insurance (LERG)

The insurance policy is most commonly relied upon when tenants fall into arrears and are unable to pay rent, or simply refuse to pay rent (for whatever reason). If that happens, you can reclaim the money through the insurance company (or at least a percentage of it, depending on the terms of your policy).

Most policies also provide legal expense coverage. For example, if you’re dealing with a tenant that falls into arrears and refuses to vacate, legal expenses to evict the tenant incur, especially if the matter escalates to court and bailiffs are required.

The extent of how much a policy will cover will naturally depend on the type of policy you acquire. However, the following is generally included with most RGI policies:

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

It’s easy to understand why this type insurance policy can be incredibly useful and reassuring for landlords. One of the biggest and stressful problems landlords face is rent arrears, particularly if the landlord is relying on the rental income to make mortgage payments (which most are). Knowing the rent will also be covered can alleviate a lot of the stresses in landlord life.

Please note, if you have some form of landlord insurance policy, while it may not specifically be for rent protection, it may still come with some form of rent loss insurance e.g. I have a landlord building insurance policy which also covers 20% of any rental loss. So before getting a separate RGI policy, contact your existing insurer and find out if you’re covered for any rental loss. If you’re not covered, or have a capped amount of coverage (e.g. 20%), you may be able to pay a little extra to get full RGI coverage, like an upgrade package. Upgrading with your existing insurer may work out cheaper than getting completely separate policies with different insurers.

Do I need Landlord Rent Guarantee Insurance?

To clarify, no type of landlord insurance is currently a landlord legal requirement for UK landlords in England or Wales, including Rent Guarantee Insurance (RGI) and Landlord Building Insurance (although you’d be stupid not to have building insurance, that’s the only type of landlord insurance I consider to be absolutely necessary).

RGI is purely for pleasure. I mean that in a literal sense. As said, the policy can make landlord life so much more pleasurable. So, allow me to explain when rent guarantee insurance (RGI) is most effective and useful for landlords…

• 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 months. In the meantime, we kind of just hope and pray that we did a thorough 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 over night 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 significantly 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 enough to cover the costs. However, in the real world, many landlords aren’t that sensible- they rely on the monthly rental income to cover all their monthly expenses, and without it they find themselves drowning. 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 would be a very wise option for you.

• Expecting turbulent times
  Sometimes, if you’re lucky, your tenant will provide you with notification if they’re experiencing financial difficulties, or may experience difficulties in the near future due to work-related uncertainties. So you’ve been warned. It may even be the case that you simply suspect the tenant is experiencing difficulties due to unusual payment patterns e.g. the tenant might pay rent 1 week late one month.

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

• If you simply don’t want to worry
  As said, RGI can alleviate a lot of stress, because you don’t have so much about rent. If you’re willing to pay a premium for that extra reassurance, despite the fact you may have wonderful tenants- but understand ‘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 added risk and likelihood of rent arrears. However, some companies do provide cover, but with a noticeable premium. Much like how most motor insurance companies put a premium on insuring young male drivers because they’re more likely to have an accident and claim.

  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 get RGI, and it’s usually because of the following reasons:

• They can’t get covered. Be warned, some insurers will NOT offer you cover simply because you don’t meet their requirements e.g. If you haven’t conducted efficient tenant referencing and credit checks.
• They don’t want to pay extra for it
• They don’t know about the policy
• They’re willing to take a chance without
• They have good tenants

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 home-owners don’t have burglar alarms, while others don’t feel safe without one.

Assess your needs, base your decision on your circumstances and do what makes you feel most comfortable.

The time I made a an Insurance claim for Rent Arrears

Okay, so I just covered when and why RGI can be so utterly useful, so perhaps the next and most logical thing to discuss is the time when RGI proved to be invaluable for me. Or at least, worth £900.

Yes, I have made a claim before so I quickly want to discuss the process with you, so you get a feel for how it typically works.

I had to evict a tenant after she fell into arrears.

God, I still despise her to this day. She was a real nasty piece of work. But I digress.

She defaulted on 2 months worth of rent, which cost me a little over £1.5k. That’s a lot of money; more than I was willing to part with.

I HATE HER SO MUCH!

If you’re interested, you can read about the gory details in the following blog entry, I’m Evicting My Tenant.

Fortunately, I had taken out a RGI policy with a company called Homelet.

Once my tenant fell into arrears, I notified them of my dilemma, which resulted in filling a claim, which entailed specifying all the details.

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

Good question! Just like some car insurance policies, when you make a claim you may have to pay an excess fee. Mine was a whooping £600. Of course, you can find policies with smaller or even nil excess fees. Admittedly, I was never aware of that at the time. Lesson learned!. I always get policies with little to no excess fees now. I actually do the same with my car insurance.

Excess fees, something for you to be aware of, for sure.

In any case, £900 was much better than losing the whole lot.

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 tenant referencing (e.g. no adverse credit). If a tenant fails referencing, then RGI may still be available if they can provide a qualified guarantor.

On a side note, if you’re interested in RGI (which I’m guessing you are, since you’re here), I recommend looking into the requirements of your preferred RGI provider before finding new tenants, because some providers will have specific requirements in regards to the type of referencing you conduct.

How much does Landlord Rent Guarantee Insurance cost?

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

Like all insurance policies, RGI will vary on the amount of cover you require, and in this specific case, the individual circumstances of your tenancy. However, I don’t want to walk away without giving you a ballpark figure, so let me give you an example of how much I paid, along with the circumstances of my policy.

I paid approximately £110 for a 12 months RGI policy, which covered a 2 bedroom house (I don’t think that’s actually relevant), occupied by a single working parent. In the grand scheme of things, it’s relatively inexpensive, especially when you consider what you get in return.

Needless to say, it’s well worth shopping around for the best deals; it’s becoming an extremely competitive market. A good starting point might be the list of insurers lower down this page. Coming soon!

Landlord Rent Guarantee Insurance (RGI) Companies

By all means this isn’t a complete list of companies that offer RGI to landlords, however, they are highly rated and reputable suppliers.

Note, there are various packages available by each provider, so I’ve only provided details of similar products from each provider for comparison purposes.

Landlord Rent Guarantee Insurance (RGI) Companies

Supplier Top Pick	Rating 4.7 feefo Reviews	Price *Compare Quotes	details *Unlike the other options, Simply Business compares quotes from the leading insurance brands, so you’re more likely to get the most competitive price. Covers Legal Expenses & Rent Guarantee Legal costs (up to £50,000) Options for 6 or 12 months’ cover Covers up to a maximum of £2,500 per month	Get Quotes
Supplier	Rating 4.9 TrustPilot Reviews	Price *£235**Inc IPT	details Landlords Rent and Legal Protection 75% of Rent covered for up to 8 months Options for 6 or 12 months’ cover (*£235 is for 12 months cover, *£210 for 6 months) Maximum of £15,000 Rent coverage Maximum of £25,000 Legal costs coverage 1 months rent excess to pay Payable by monthly installments Policies available that accept Housing Benefit tenants **IPT is Insurance Premium Tax and is charged at 12%. *Use exclusive discount code PIPLANDLORD for special rates.	Call for more info: 0344 567 4001

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 information.

Is this possibly the best protection for Landlords against Rent Arrears?

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

Actually, it’s not really an RGI product at all, but more so a complete landlord rent collection solution which includes a ‘type of’ RGI policy (among a butt-load of other gadgets).

I say a “type of” RGI, because it’s a little bit different to how the conventional RGI policy works. Normally, you have to make a claim if your tenant falls into arrears, and then go through a process which results in a payout, which hopefully isn’t too far down the line (if you have a valid case, of course). Just like any normal insurance claim.

But with the RGI policy offered by LettingAProperty you benefit from a “rent on time” policy, which basically means you get paid rent on time even if your tenant doesn’t pay! You don’t have to go through any claims process, you simply just get paid on the date you’re contracted to get paid. See the difference?

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…

Letting A Property	Rating 4.9 Review Centre	Duration Month by month	Notes / Includes Complete Package Solution for Rent Collection & Guaranteed Rent, Home Emergency Cover and Legal Cover! Advert on all major property websites, including Rightmove & Zoopla Rent paid on time – paid to you on time even when the tenant doesn’t pay! Full tenant referencing (2 x people) Digital tenancy agreements Deposit secured Holding fee service Dedicated advisor Guaranteed rent Legal helpline Legal expenses Eviction support Home emergency cover Dispute resolution Free tenancy renewals Read about my fantastic Experience With Letting A Property To Find Tenants *Landlord pays one-off £149 upfront, and then £99 per month.	Price *£149 setup fee + £99pmInc VAT Promo running	Visit Website

Quick update: LettingAProperty stumbled across this article and threw an exclusive £40 discount my/our way! Enjoy.

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.

If you know of any other companies that aren’t currently listed (but should be), please contact me or leave a comment below.

Word of warning: inform your insurer of any changes in circumstance

Just a quick final warning before I drive off into the sunset.

Insurers are notorious for finding ways to refuse claims. Needless to say, if they can find a reason not to pay out – no matter how trivial – they will! So it’s definitely in your best interest not to give them one.

If there’s ever a change in circumstance regarding your tenant or the tenancy itself (e.g. if he becomes unemployed, or if you change tenants altogether), inform your insurer immediately so they can update your record and make any appropriate changes to your policy.

If you don’t update your policy by informing your insurer, or at least enquiry whether you need to or not, you may find yourself with an invalid policy.

Brother, you’ve been warned!

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