Are rent guarantee policies still being offered?

by Readers Question

14:26 PM, 21st May 2020
About A week ago

Are rent guarantee policies still being offered?

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Are rent guarantee policies still being offered?

I have been told that it is impossible now to arrange a rent guarantee and tenant eviction insurance policy as these have been suspended, a better way is to say they have been withdrawn from the market.

I was told by the NRLA yesterday that rentguard with whom they work has suspended and the brokers I use have a similar message on their site.

In the present very uncertain climate I would be very wary to let any property without this insurance.

Can someone help by providing information please?

Aydin



Comments

Jason McClean

15:06 PM, 21st May 2020
About A week ago

Hi Aydin

The Government has banned the eviction of tenants. All the rent guarantee policies I am aware of will only consider paying out when the eviction process has started.

So currently these policies cannot be used. You cannot meet the claims criteria due to the legislation preventing evictions.

The FCA says we need to treat customers fairly and not to sell worthless policies that cannot be used or have no value. Selling a rent guarantee policy currently in my opinion is selling an insurance product you cannot use and is not treating you fairly. I know a lot of other providers think the same, hence your reaction in the market when you ask to buy it.

There may be some brokers or insurers still selling these policies but there is absolutely no point buying it unless you can use it. Read the documents for conditions required for making a claim before buying.

On a broader topic, as well as working in insurance, I have been a landlord for 22-years with multiple properties. I have never once come across a situation when rent guarantee insurance would have worked for me. I am the opposite of you, I would never dream of buying one of these policies now or int he future, I think they are a waste of money. The reason I say that is if your tenant meets the acceptance criteria, then the chance of them ever defaulting is so small it is in my opinion not worth insuring against.

I hope this helps.

Warren Gourlay

14:00 PM, 22nd May 2020
About A week ago

Mmmm, slightly disagree with Jason. A few years ago I had a tenant couple renting from me, who I had kept insured against rent default. About 2 years into their tenancy they decided to stop paying the rent (they were a cash rich older couple who had both sold their houses to live together in rented accommodation) and despite my efforts to find out why they they had stopped, they simply slammed the door in my face. I think they had decided to buy a house outright together and wanted to save a few months rent! Of course after 2 months of no rent I approached the insurance company, and after a bit of form filling and sending relevant documents, the insurance company agreed to pay the outstanding rent and assigned a solicitor to take the couple to court. A few months later after the court evicted them I had my house back and they had a CCJ. The insurance saved me at least £6K in lost rent and court costs. But hey I’m talking about pre Covid 19 days. But once evictions are back on, I personally would recommend rent guarantee insurance.

LordOf TheManor

18:43 PM, 22nd May 2020
About A week ago

I'm with Warren on this one, Jason.

Tenants' circumstances can change - and they do - even if they meet the acceptance criteria for RGI. All it takes is for a couple to split up, one moves out and leaves the other unable to afford the rent. The 'nicest people on earth' until then, decide they won't or can't pay. Court costs and legal fees with no rent coming in is stressful enough, but even more so if you have a BTL mortgage to finance from your own pocket.

Not many rents in my letting area are less than £1000 a month. The process of eviction takes time (4- 5 months at the quickest speed) and judges always use the tenants' deposit to reduce the rent debt. Expect another month cleaning and clearing the property at your own expense. Repairs, too - all while there is no rent to cover it.

Both my claims ran into thousands of pounds, £12k and £10k. I paid £100 each for the policies. Twice over, it proved to be the best £100 ever spent!


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