Even the most reliable tenants can run into financial difficulty and become unable to pay the rent – as the COVID-19 pandemic highlighted. When this happens, Rent Guarantee Insurance becomes incredibly important for a landlord to safeguard their income.
A small change in circumstances, often outside of the tenant’s control, can be enough to affect tenants’ ability to pay their rent. If you do not have Rent Guarantee Insurance, your income and mortgage could be at risk.
What is Rent Guarantee Insurance (RGI)?
Rent Guarantee Insurance, sometimes called Rent & Legal Protection Insurance, is an insurance policy that protects you from the risk of your tenants not paying rent.
With RGI, you can claim your monthly rental income even if your tenants can no longer pay it. You simply make a claim, and if it meets the terms of the policy, the insurer pays your rental income up to a maximum of £3,000 per month.
OpenRent sells RGI as a joint policy with legal expenses insurance, covering you against any legal costs occurring as a result of tenant disputes or evictions.
In the event that your property has suffered from neglect or damage caused by your tenant, an OpenRent policy also includes cover for alternative accommodation and storage. It will even cover a further 50% of your monthly rent for up to 3 months after you manage to regain possession of the property until it is ready to be re-let.
In total, the policy covers you for up to £50,000. This level of cover is a huge weight off many landlords’ minds. Just imagine if your tenants were to lose their jobs or run into financial difficulties, leaving you on the hook for tens of thousands of pounds in losses.
You can find full details of OpenRent’s RGI policy on our website.
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Do I Need RGI?
Non-payment of rent is a nightmare scenario for many landlords, and unfortunately happens all too frequently.
But whilst being a common problem, it doesn’t need to be a big one.
One of the most precious elements of renting out a property is the tenant-landlord relationship. If your tenant misses a rent payment, this could lead to distrust and issues further down the line. No one wants to feel as though they have to evict their tenant. Rent Guarantee Insurance can remove a lot of the pressure caused by a missed rental payment, giving you that bit of extra time to accommodate your tenant’s situation and agree on the best course of action.
If you find yourself in a situation where eviction has become your only option, your OpenRent RGI policy will provide you with cover for the cost of eviction.
What if I Already Have Insurance?
You may be thinking, “but I already have building and contents insurance that covers losses of rental income”.
It is true that some such policies have clauses covering losses of rental income, however, these usually only apply if the property is made uninhabitable due to one of the insured perils (e.g. flood).
In any other situation, such as a change in tenant circumstances, you are unlikely to be covered without a specific RGI policy.
How Much is RGI?
The cost of RGI varies greatly depending on the supplier. In the aftermath of the COVID-19 pandemic, considerable backlogs in the courts greatly delayed eviction proceedings and significantly increased costs for insurers. These costs translated into higher prices for landlords.
However, for most landlords, it is still possible to get high-quality cover without sacrificing a large portion of your rental income. We can now offer an affordable policy which provides you with all of the cover you need.
You can see our pricing and purchase rent guarantee insurance on our website.
It is also worth noting that, due to the backlogs landlords who choose not to purchase RGI now risk facing much longer and costlier court processes themselves, and therefore greater financial losses.
How Can You Buy RGI and Who is Eligible?
We offer Rent Guarantee Insurance to landlords across the UK, including HMOs and room-only lets.
To be eligible, you just require a tenancy agreement (though this can be signed after the policy is purchased) and the tenants must have passed comprehensive tenant referencing. With OpenRent, if a tenant fails referencing, then RGI may still be available if they can provide a guarantor to pass in their place.
In the event of a claim, it is the landlord’s responsibility to present completed referencing documents to the insurance provider. If you order referencing on OpenRent, you will be able to access all of this information on your account for easy access.
As soon as the tenants successfully complete referencing, you will be able to purchase the policy.