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Benefits of Rent Guarantee Insurance for Landlords

For landlords, there is no safety net quite like rent guarantee insurance. Losing out on income because a tenant can’t (or won’t) pay is a stressful experience that leads to potential financial hardship. Whatever the reason, when a tenancy contract is not fulfilled by the paying party, a landlord is the one left in the lurch facing the consequences. To protect against this loss of income, property owners turn to insurance schemes like the rent guarantee agenda, and this guide is here to explain the benefits.

A rent guarantee insurance can help avoid issues with payments.

Typical Factors Covered by Rent Guarantee Insurance

Upper Key explains that rent guarantee insurance is there as a protective measure. It covers the basics of backup proceedings, while offering channels of recovery should a negative tenancy relationship form. Typical factors you can expect from a comprehensive, authentic policy are as follows:

  1. Recovery of lost rent

  2. Rent protection for vacant property

  3. Support with evicted tenants

  4. Protection against squatters

  5. Legal costs and proceedings

  6. Cover against damage to the property caused by tenants

Rent Arrears: A Very Real Problem for Landlords

Though there are often legitimate reasons, tenants getting into arrears with their rental payments is never easy to navigate for landlords. Finding ways to secure your business against missed payments is essential. Tenants can sometimes end up months in deficit with their rent, which puts landlords in such a difficult position regardless of the reasons behind the missing money. Property owners may be able to begin eviction proceedings immediately, but the process itself takes a long time to complete and tenants are ultimately sitting in the property for free until the court provides a date for approval.

The first step is to reach out to the tenant to inform them of the missing payment and request a reason and immediate rectification. If this yields no results, give them a warning of your intention to begin legal proceedings. After this, things will be settled in court.

The Benefits

There are six main benefits to consider as a landlord looking into this option for your property. Supporting your business with expert crutches is a smart move for anyone turning a profit from a professional channel. Find a viable way that is validated through successful statistics and shop around for the best deal before you say yes to a policy. Read on to find out more about the benefits.

Payment if Rent is Missed

Rent payments are the source of income for the owner of a rental property. When this income doesn’t get paid, regardless of the reason why, it negatively impacts the revenue of the landlord. While this is a risk to mitigate and one of the most obvious detrimental factors, some landlords manage a lengthy career in rental contracts without ever seeing a missed payment. So, while it may not happen to you, the possibility is always in the background. There is not much you can do in the immediate aftermath of a refused or missing rent transfer.

The main advantage of rent guarantee insurance, according to Upper Key, is that you have a backup in this context. If the rent doesn’t come in, it is paid through your policy as long as you have the correct evidence and follow the stipulated protocol. The only factor to understand is that it usually does not adhere to the first month's default and there will be a cap on what you are able to claim. Though this is not true of all policies.

In case of a missed rent payment, you can claim it through your policy.

Practical Solution to a Common Problem

It is the most direct and practical solution to a frequent issue for landlords. Whereas you can’t protect against everything, you can protect your assets against this eventuality in a range of contexts. In most cases of rental arrears, it doesn’t matter if you have put all the safeguards in place before the fact. For example, you can vet tenants, check references, verify employment and income, and even ask for a guarantor. None of these things add up to a guaranteed rent payment. People lose jobs all the time, especially in precarious economic and social climates such as now. It is an unavoidable part of life, and it might even happen to you. References can be falsified despite it being illegal, and circumstances change all the time.

Support for Legal Costs

The primary reason a landlord may need to go to court is to evict a tenant that refuses to leave or is making life difficult. Where there is a dispute, a court is typically the only viable route for finding a valid solution. A judge is the only legal body able to mandate a tenant removal if they warrant that there is a valid justification for seeking it out. Usually, this is the last resort step at the end of a drawn out process, but that does not detract from the fact that it costs a lot of money to go through legal proceedings. There are court fees, solicitor payments, documentation, and the cost of the time you have to spend fulfilling your obligations and seeing things through. Most RGI policies will factor this in, and cover (to a certain extent) these financial demands.

Peace of Mind

Peace of mind is invaluable. The stress of dealing with let-down tenants is enough to cause health problems, as is the worry of not receiving the income you depend on. So, the simple truth is that you are immediately offered peace of mind in knowing that you have taken a positive, legal step to protect your finances.

With guaranteed rent insurance, you can relax and enjoy your experience.

The Downsides

It is always worth noting the counterpoints so as to conclude with an objectional viewpoint.

Monthly Cost

There will be a fee percentage charged every month (some companies do this annually). This is an additional expense to factor into your budget and may put some people off. Usually, the policies range in price and won’t be too expensive in the grand scheme of financial outputs.

Legal Loopholes and Hoops to Jump Through

Engaging with a rent guarantee insurance motive means that you will have certain obligations and responsibilities to uphold. Nothing too demanding, but should the time come when you need to call upon your policy, everything must be done above board and legitimately to avoid penalties or voiding. For example, some policies won’t cover the rent if a tenant leaves or is evicted. So, if you foresee this type of circumstance in the future, find a policy that will have your back in this arena.

Lengthy Process

It may take a while for any actions to impact the situation. This means you will have to have patience and wait for the results to make a change. While most policies will protect you for six to twelve months in terms of missed payment months, the first month is typically not claimable while waiting to see whether or not the tenant is going to pay.

Overall, the benefits of rent guarantee insurance outweigh the downsides as the positive attributes more than counteract the negative ones. As a landlord, there is nothing more stressful than having a tenant that won’t pay, refuses to leave, or damages your property. That is why protecting against that in whatever way is available is better than sitting vulnerable and letting anxiety take charge. Landlords will find peace of mind and keep their business safe in the face of risk.

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