You wouldn’t get in your car without insurance. You wouldn’t go on holiday without it. Our lives, pets, health, homes, contents and even weddings are insured. However, many landlords don’t think to insure their rental income.
But is there any point? Is rent protection policy an additional cost that you just don’t need, or in today’s world is it better to be safe than sorry?
Rent arrears are one of the UK’s biggest forms of debts, with many landlords experiencing the frustration of a non-payment at some point in their rental career. A recent Landlord Panel from the National Association discovered that 47% of the landlords surveyed have experienced rental arrears in the past 12 months.
However, with the purchase price of properties at a sky-high rate, landlords are facing high mortgage repayments, and more often than not a missed rent payment can have a catastrophic impact on a landlord’s cashflow.
What should I look for in a policy?
You must make sure that the policy you choose covers the requirements you have – obviously!
Make sure the company you choose is reliable: you could pay hundreds of pounds into a scheme, but if the company you’re paying goes bust, you could be left with nothing. Most schemes are underwritten by a lager insurer, but be sure to do your homework before you sign up for anything.
Make sure you have enough cover: this sounds obvious, but many policies cover a standard rental amount, and if you are charging more you could be left out in the cold. Make sure you double check that the amount you’re covered for is sufficient!
Check whether the cover is per tenant, or for the entire property: many policies cover the existing tenants, which is fine, until your tenants change! There is so much to remember during a change of tenants, swapping details on your insurance isn’t likely to be high on your list – it’s easier to sign up to something that covers the entire property and it’s income, rather than the individuals.
Do you need a specific type of insurance? There are many different types of insurance available, with some agencies specialising in tenants that receive housing benefits, students, or sharers. If your property always attracts a certain type of tenant, it might be wise to explore a bespoke insurance option.
Will they actually cover me, or will they wriggle out of it? As long as you are keeping to the rental rules, there is no reason why your insurance shouldn’t cover you in the event of a tenant failing to pay their rent.
However, there are a few boxes that you would have to tick in order to make sure that you are keeping up your side of the bargain as well.
You will need to make sure that:
- You have a legal tenancy agreement in place, which covers all of your tenants
- Most insurances will require your tenant to have passed referencing checks, including credit checks
- You will have to have taken and protected a deposit
- If you require a licence for your property - either a selective landlord licence issued by your local authority, or an HMO licence – make sure this is in place
- Make sure you have an up to date gas safety certificate in place on the property if required
So what should I do next?
- Keep a record of what payments are due, when they’re due to be paid, and by who
- It is acceptable to make a polite enquiry if rent does not appear when it is due – although be careful not to ‘harass’ your tenant
- If you can work with your tenant to address the situation and resolve it, try to do so
- If resolving the issue seems unlikely, and the tenant believes affordability is likely to be an ongoing issue, consider discussing with the tenant if they wish to continue the tenancy
- Keep a clear record of all communications·
- If you decide to evict the tenant/s based on rental arrears under a section 8 notice, this evidence may be of use further down the line.
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