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
• 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). In such cases, landlords can recover their lost rent through the insurance, either in full or partially, depending on the policy terms.

Most RGI policies also include legal expense coverage, which can be invaluable in these situations. For example, if a tenant falls into arrears and refuses to leave, the costs of eviction can quickly snowball, especially if the case goes to court and bailiffs are required. Needless to say, it can be 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. It’s a beautiful thing.

“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 completely different coverage, and if you get them confused you might end up in a mental asylum after trying to make a claim. I’m serious.

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

• 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 that your standard landlord insurance policy will include RGI (though some providers offer it as an optional add-on). However, it’s more likely that loss-of-income protection is included.

A common – and potentially crippling – misunderstanding is that many landlords believe they have rent guarantee protection when, in reality, they’re only covered for loss of income. In practice, loss-of-income cover is far less relied upon or needed than RGI, which is why it’s often bundled into policies.

You can see why such a mix-up could lead to utter devastation.

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.

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).

RGI is purely for pleasure, and I mean that quite literally.

So it’s less a question of “Do you need it?” and more, “Would your life be better with it?”

Having been a landlord for over a decade, I can say without a shred of doubt, that the bleakest times have been when dealing with unreasonable tenants who’ve fallen into arrears. Any landlord who’s been through it will likely attest to the same.

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 impossible to find a tenant who’s guaranteed to pay rent on time, every month. If such a mythical creature existed, bad tenants wouldn’t.

RGI is one of the few tools we have to weather the rent-arrears storm, which is exactly why so many landlords consider it essential.

I’ve been genuinely shocked by how quickly “perfect” tenants can transform into bottom-of-the-barrel, deadbeat, blood-sucking vampires. And even well-intentioned tenants can fall into hardship, often through no fault of their own, leaving them in agonising debt. So RGI isn’t just protection against bad actors; it’s protection against bad luck, which spares no one.

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 you don’t really know how reliable they’ll be until they’ve proven themselves, which can take several months. Essentially, trust has to be earned (this works both ways, of course).

  In the meantime, we’re left hoping and praying that we did a good job referencing them properly, minimising our risks.

  Tenant referencing is crucial and one of the best ways to separate the wheat from the chaff. But even the most seemingly perfect tenants can turn out to be problematic. Circumstances can change overnight, and referencing simply can’t predict the future.

  I’ve personally had issues with working professionals who had flawless financial references. The point is, referencing only gives you part of the current picture, it doesn’t guarantee the outcome.

  That’s why it’s always useful to have RGI for all new tenants, no matter how promising their references appear. Once you’ve built a good working relationship with a tenant, you can always choose not to renew the policy when it expires. However, many landlords continue renewing for extra peace of mind, because in today’s turbulent economy, anything can happen.

  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 would have a sensible emergency contingency set aside, so if the worst happens, there’s still enough to keep the lights on. In reality, though, many landlords aren’t that sensible; they live paycheque to paycheque, relying on monthly rental income to cover overheads. Some are a bit more prudent and can survive a month or two without income before feeling the pinch.

  The problem is, when a tenant falls into arrears, rent payments can come to an abrupt halt for several months, especially in particularly toxic situations where court action is looming.

  If you’re a landlord who heavily relies on regular and on-time rental income to stay afloat, RGI could be a very wise option (but I’d still recommend building a contingency fund as well).

• Expecting turbulent times
  Sometimes, if you’re lucky, your tenant will telegram financial difficulties with subtle and not-so-subtle hints, such as 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 mentioned, RGI can be an extremely effective way to reduce stress, because the fear of not receiving rent isn’t as overwhelming.

  If you’re willing to pay a premium for that extra reassurance, even if your tenants seem wonderful (because, as we know, anything can happen), then RGI might just be the sensible choice 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).

Why don’t landlords get RGI?

From my experience, most landlords usually don’t bother because of the following reasons:

• They can’t get covered (there are criteria to qualify, which I’ll cover shortly)
• They don’t want to pay for it
• They don’t even 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

On the other hand, many landlords do take out RGI, and an increasing number are catching on. Those who do often wholeheartedly endorse it because it removes a lot of stress. Ultimately, it comes down to the individual landlord and how safe or protected they want to feel, much like some people gamble on skipping 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).

You’ve heard my thoughts, so now I’ll leave it in your capable hands to decide whether it’s worth it.

The time I used RGI to make a Rent Arrears claim

So, I’ve covered when and why RGI can be so useful. The next logical step is to share my personal experience – how it proved invaluable for me. Or at least, worth £900.

Hopefully, my story will give you a practical sense of how the claims process works and what to expect (though, spoiler alert: it works pretty much exactly as you’d expect an insurance claim to work).

Long and painfully 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 (most of which made no sense whatsoever, and some of which you’d expect a toddler to make). A common story, and a painful one.

She defaulted on two months’ rent, costing me a little over £1,500 – money I had no intention of waving goodbye to. After serving her with a Section 8 eviction notice, she thankfully vacated promptly (it could have got much uglier). But I was still in the hole, and it was obvious she wasn’t going to repay a single nugget.

Fortunately, I’d taken out RGI with Homelet – recommended by my letting agent at the time – so I informed them of my situation and began the usual form-filling to submit a claim.

Approximately 3-4 weeks later, a cheque for just over £900 arrived. So, what happened to the other £600?

Good question! Just like car insurance (and most other policies), I was subject to an excess fee. A whopping £600. At the time, I was naïve about this and hadn’t realised mine was so high. Still, I was elated to have recovered £900, especially through a relatively straightforward claims process.

However, lesson learned!. These days, I always opt for policies with little to no excess fees (I do the same with my car insurance). In my opinion, paying a small premium to keep those nasty excess fees at bay is worth every penny.

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

There are usually a few requirements you must meet to be eligible for RGI, which generally include the following (though some insurers may have additional criteria):

• 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 guessing this will be the deciding factor for most, after all, it’s always about the money, right?

As with all insurance policies, the cost of RGI varies depending on the policy and the level of coverage you choose. On average, it’s approximately £180 per year, per policy. Bulk discounts may also be available if you’re taking out multiple policies.

Needless to say, it’s well worth shopping around for the best deal, as the market is becoming increasingly competitive.

Overall, I think RGI is very reasonably priced considering the protection it provides, and many landlords are often surprised by just 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 £30. 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 4.8 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.

Better than Rent Guarantee Insurance? Maybe…

I’d be remiss if I didn’t mention this.

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

It’s not your typical RGI policy; it’s more like a complete landlord rent collection solution packed with the ultimate rent protection (plus a bunch of other handy features).

I get that most folks aren’t after a fully-fledged management service if they just want rent guarantee insurance (RGI). But LettingAProperty offers something pretty unique that, in my opinion, delivers better peace of mind – which, after all, is what insurance is really all about!

Their Complete Care package includes a feature called “rent on time”, which means you get paid your rent on time (with in 5 days of the due date) even if your tenant doesn’t pay, and without having to go through the usual claims hassle that comes with a typical RGI policy.

Sure, it costs more than regular RGI policies, but this package is not the same beast. I think it’s a pretty awesome product, so I wanted to shine a light on it…

Complete Rent Protection

Letting Agent	Rating	Term	Includes / Notes	Price from
Letting a Property	Rating 4.8 Google Reviews	Duration 12 months	Includes / Notes Complete Care package Key features Tenant-find service Contract drafting & digital signing Rent collection 24/7 customer service Rent protection / guarantee Repairs & maintenance management Rent on Time (Rent always paid within 5 days - even if tenant doesn't pay!) More details More features included Tenant-find service includes marketing on Rightmove, Zoopla & PrimeLocation. Tenant referencing (2x tenants) Deposit registration Legally binding tenancy Rent protection (£6k / 6 months) First replacement rent at week 6 Arrears management Dedicated Tenancy Manager Access to trusted contractors Property Manager support *Price Annual Plan Save 10% Rent range Monthly Annual £1 - £1000 £89 £1,068 £1001 - £1500 £98 £1,176 £1501 - £2000 £107 £1,284 £2001 - £2500 £125 £1,500 £2501 - £3000 £134 £1,608 £3001+ £143 £1,716 Monthly Plan Rent range Monthly Annual £1 - £1000 £99 £1,188 £1001 - £1500 £109 £1,308 £1501 - £2000 £119 £1,428 £2001 - £2500 £139 £1,668 £2501 - £3000 £149 £1,788 £3001+ £159 £1,908 A one-time upfront setup fee of £199 (£189 with our discount code) has been added to the first year total (but not included in the pricing matrix), which covers 8 weeks of marketing. Service charges only begin once a tenant has been secured.	Price Discount price PER MONTH*£89 Inc VAT FIRST YR TOTAL£1257Discount included	Visit WebsiteBook a call to discuss£10 Discount Code: PIP10

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.

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

Landlord out xo