Safeguarding your rental income with rent guarantee insurance
Article Posted - 18th November 2013
Taking out a rent guarantee insurance policy at the start of a tenancy, after the tenancy check, provides income protection to landlords if tenants fail to pay the rent.
Although economic conditions appear to be slowly improving, rent arrears present a real risk to landlords. In the second quarter of 2013, rental arrears remained the most common problem experienced by landlords, with 39% of NLA member landlords who participated on a recent NLA Landlord Panel stating they had experienced rental arrears during the past twelve months. These landlords said they had on average 2.2 tenants in arrears, with the total owed by tenants in arrears to their landlords working out at an average of £1,890. Furthermore, a full 45% of landlords who let to tenants in receipt of Local Housing Allowance had recently experienced rental arrears which averaged £969.
The NLA Rent Protect policy has been specifically designed to meet the needs of a landlord wishing to protect their rental income in the event that a tenant fails to meet their obligation to pay their rent. It covers landlords for up to £2,500 per month in unpaid rental income subject to the tenant having been credit referenced. It is paid up to the point that the property becomes vacant. Given that it usually takes at least several months to resolve a situation of rent arrears (particularly if you need to regain possession of your property), the policy presents a good deal for landlords as it covers unpaid rent up to a maximum of £25,000 or ten months' rent.
The policy also incorporates a broad-ranging legal expenses cover of up to £100,000 per claim (with a maximum of £1,000,000 in any one year). For example, legal fees would be covered when seeking to regain possession of the property as well as for recovery of costs for damage and repair to the property. Professional expenses incurred in respect of representation during an investigation by HM Revenue & Customs also fall within the legal expenses cover, as does a 24-hour specialist legal helpline.
Are you eligible for NLA Rent Protect?
As you would expect from the NLA, terms and conditions are transparent, and the online purchase process is straightforward, with both six month and one year options as well as discounts for NLA members. NLA Members save up to £10 per policy.
Please note that there are a few common sense criteria that landlords must meet to be eligible for NLA Rent Protect. Most important is that landlords need to have copies of two forms of identification relating to the tenant, one of which must contain a photograph. You also need to have carried out either a Basic NLA Tenant Check showing no County Court Judgments in the immediate preceding three years and no outstanding County Court Judgments OR a Full NLA Tenant Check with a ‘pass' rating. If you opt for the Basic NLA Tenant Check, you will also need a written employer's reference confirming that the tenant or guarantor (if applicable) is in current and permanent employment.
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