People often get confused about what exactly the loss of rent policy covers in their insurance. To put it simply, there is a loss of rent cover and a rent guarantee policy. They are two completely different things but we will look at both of these in detail.
Loss of Rent Cover
Loss of rent cover relates to the rent lost due to the property being uninhabitable after an insured peril. It has nothing to do with the tenants not paying their rent. The policy would cover the rent payable by the tenants while they are in alternative accommodation. The policy would also cover the fees for alternative accommodation. As an example, if a water pipe burst and the property flooded the landlord would rehouse the tenants until the property was liveable again. The tenants would not have to pay the rent at that time as they are not living in their own home. Instead, the insurer would pay the rent for that period as long as the policy covered the incident. Another example would be a damaged roof after a storm. The property is uninhabitable for a period of time. The tenants would be placed in temporary accommodation whilst the roof repair and replacement is ongoing. The insurance would cover the rent lost and any amount paid for alternative accommodation. This would come under your landlord building and contents insurance.
What is Rent Guarantee cover?
This is a policy that specifically covers the tenants defaulting on their rent payments. There are many instances where this could happen. Perhaps the tenant has lost their job and cannot afford the rent. Maybe they have left the property and stopped their direct debit. If the tenants are still in the property and are not paying the rent the landlord may have to evict the tenants in order to relet the property.
Before buying a rent guarantee policy the tenants need to have passed a recent credit check and meet certain affordability criteria. The cover has to be in place before the tenants’ default, it will not cover existing payment issues. It is best to take the policy out when a new tenancy agreement starts so the landlord can complete all the referencing and checks before accepting the new tenants. We can provide a policy that covers the unpaid rent plus the fees involved in evicting tenants and recovering tenant property damage.
You will see therefore that the above are two very different types of policies. It is possible to have both items insured at the same time through different policies or combined in the same policy. Contact us first if you are thinking about taking out a rent guarantee policy.