Rent guarantor or protection insurance?

Rent guarantors and rent protection insurance products operate on the same, basic premise; both offer landlords a back-up option for rental payments if a tenant cannot pay. This however, is where the similarities generally end, and things are made more complicated by an influx of providers and products that don’t necessarily deliver what they seem to suggest. 

Too often, we’ve seen insurance products describe themselves as guarantees, muddying the waters further, and guarantor services that seem to function more as insurance products.  

What do you need to know to make sure you have the right support in place? 

What is rent protection insurance?

A rent protection insurance is purchased by the landlord to protect their income if the tenant cannot pay their rent. You can claim back a sum to cover losses and the insurer will compensate you for a limited period. The tenant is not involved in the contract and the insurer has no claim against the tenant for reimbursement. 

Some policies also include solicitor fees, court costs, possession proceedings and enforcement. An insurance product offers landlords structured financial protection across a property portfolio. Policy cover periods are usually limited, and like any insurance, a protection policy comes with waiting periods, excess payments and caps on claims.  

What is a professional rent guarantor?

A professional rent guarantor service is purchased by the tenant. The guarantor is a part of the tenant contract from the outset. 

It helps tenants who cannot meet income or referencing criteria, such as students, freelance workers or people on benefits. It can unlock tenancies which are otherwise unavailable, benefiting renters and landlords. The application process can be very quick, speeding up tenancy agreements and reducing void periods. 

The level of support varies across providers. Not all services will include longer-term tenancy coverage, damage protection or legal support. Others, like RentGuarantor, will work with the tenant and the landlord to find a satisfactory solution and ensure the rent gets paid. 

RentGuarantor also combines its professional guarantor service with a guarantee against damages of up to two months’ rent, providing additional reassurance for landlords. In the event of a claim, the renter is liable for these costs and they are paid to the landlord at the end of the tenancy. Claims are processed via the Dispute Resolution Board. 

Who's paying?

It is the tenant’s decision to use a professional guarantor service, which means the cost is their responsibility. With an insurance product, purchased by the landlord to protect themselves, the costs fall with the landlord.  

Who is protected?

A rent protection insurance protects the landlord. A professional guarantor service offers support to both landlord and tenant. 

How long do you need the cover?

A typical insurance policy might cover six months’ worth of rent in the event of arrears, while a professional rent guarantor service will usually do more.  

RentGuarantor covers up to 12 months’ rent or until repossession, whichever comes first. We will also act as a guarantor for up to 3 years, or until repossession. RentGuarantor will pay after 3 months’ arrears (and backdate it). This ensures it can follow any legal processes required, which won’t necessarily be possible from a provider paying out from the first month. 

Do you need legal support?

A provider like RentGuarantor offers mediation support as part of its package, helping to get things back on track before legal fees or eviction proceedings. RentGuarantor also handles court applications and associated costs. 

Or, landlords can purchase insurance products that provide legal cover, but should check their policy includes everything they need. 

Is your provider credible?

There has been an influx of providers since the Renters’ Rights Act was announced. Landlords and tenants should take time and care to understand the product or service they are purchasing, making sure it is fit for purpose.  

Insurance in the UK is a regulated activity, and providers must be authorised by the Prudential Regulation Authority and Financial Conduct Authority (FCA). It is a criminal offence to offer insurance products unless authorised. Professional guarantors meanwhile, are unregulated. RentGuarantor is the only provider listed on the Alternative Invest Market (AIM), part of the London Stock Exchange, and as such, is subject to rigorous governance and compliance. 

Your checklist of questions to ask: 

Of your insurer: 

• What’s excluded if I make a claim?  

• Are legal expenses covered? 

• How many months rent are covered? 

• What excesses apply?  

• What waiting periods apply?  

Of your tenant’s rent guarantor provider: 

• How long will the provider act as guarantor? 

• How quickly will the provider pay out?  

• How long has the provider been in business?  

• What credentials do they have?  

• How easy is the process?  

• Does your preferred company have a good track record?