As a landlord, no matter how thorough your tenant and property checks are, you might at some point experience loss of rent. But if you rely on it to pay your mortgage or provide you with an essential source of income, unexpectedly losing out on rent is going to be a problem.
Landlord rent insurance can protect you against missed payments and keep your finances on track. Here’s a breakdown of what it is, what it covers and how it differs from other types of landlord insurance.
In a nutshell, it’s an insurance policy to cover you during times when you might lose your rental income, for reasons out of your control.
For example, perhaps your property has become damaged due to a fire or storm, making it uninhabitable for an extended period of time. If this happens, you’re going to want a landlord insurance policy that covers you for two separate issues; the cost of repairs (an essential landlord obligation) and your loss of earnings while the property remains unoccupied. Landlord rent insurance covers you for the latter.
Similarly, if your tenant can’t pay their rent because they’ve lost their job, or they become unable to work due to illness, landlord rent insurance can protect you.
As a landlord, you know that your obligation to make mortgage repayments doesn’t stop just because your income does. If you’re a buy-to-let landlord, it’s particularly important to make sure you find landlord insurance that covers you for loss of rent. In fact, some mortgage lenders may require you to have loss of rent insurance in place before approving your mortgage.
While many landlord insurance policies include loss of rent cover for periods of vacancy, not all of them will offer a guarantee against tenants who don’t make their payments. This is important because even if you carry out the most stringent background checks and selection process, you could still end up with a tenant who's either unable or unwilling to pay.
Landlord rent insurance policies are made up of three elements – rental cover, rent guarantee and legal cover. Here’s what each means in practice:
If flood or fire causes damage to your property and your tenants aren’t able to stay there, landlord rent insurance will cover you for loss of earnings during this period.
If a tenant falls ill for an extended period of time, or they find themselves unexpectedly unemployed, they might be unable to pay rent. And in some cases, such as during disputes, tenants may even refuse to pay their rent. Specialist landlord rent insurance will offer you protection in these circumstances.
If your tenants are unable (or refuse) to pay their rent, and your rent arrears continue to build up, you might be forced to take legal action to protect your cash flow. The right landlord rent insurance policy will also cover any legal expenses you might incur relating to repossession, eviction, damage caused by tenants or the recovery of rent arrears.
If you have a commercial property, in extreme circumstances, you may be forced to consider a forfeiture of the business lease.
What do I need to do to be eligible for landlord rent insurance?
When it comes to taking out loss of rent insurance, there are certain conditions and requirements to be aware of.
Most policies will require you to do referencing and credit checks on your tenants, this is important, as you don’t want to find out later down the line that the person living in your property isn’t who they say they are. Some insurers will also ask you to have a certain type of tenancy agreement in place, or require some tenants to have a guarantor. There might also be a minimum amount of time that you must wait between taking out the policy and making your first claim.
Regardless of the loss of rent insurance you go for, always check the small print first.
If you’d like to discuss your landlord insurance requirements, get in touch with a member of our expert team who’ll be more than happy to advise you and help you find the right cover.