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What is rent guarantee and do I need it?

Property investment is an exciting and profitable path to take, however being a landlord does come with its potential risks.

One of the best ways to mitigate these risks is by taking out rent guarantee insurance. Let’s delve into what rent guarantee is, how it works, and why it may be beneficial for you.

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What is rent guarantee?

Rent guarantee is a type of insurance policy designed to protect landlords against the risk of non-payment of rent by tenants. Typically, this insurance covers the loss of rental income due to tenant default, eviction costs, and legal expenses incurred during the process.

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How does rent guarantee work?

Purchasing your policy

You will purchase your rent guarantee insurance policy from an insurance provider. This involves paying a premium, which can be a one-time payment or recurring monthly or annual payments.

Contacting your tenant

In the event that your tenant fails to pay rent as per the tenancy agreement, your lettings agent will make a written request for unpaid rent on your behalf. If you have still not received payment after seven days, they will contact your tenant again, and you should contact your insurer to request a claims form.

Claim processing

After contacting your insurance provider a second time and still not receiving a resolution, you should begin the process of filing a claim by filling out your claims form and providing the necessary information and documentation.

Compensation payment

Upon approval of the claim, the insurance provider will cover the rental income you have lost. This mitigates the financial impact of the tenant's default and safeguards your income stream.

Policy renewal

When you reach the end of your rent guarantee policy term, you will need to renew if you wish to continue the coverage.

Do you need rent guarantee insurance?

Deciding whether you need rent guarantee insurance will depend on many things related to your rental property, financial situation, and risk tolerance.

Your financial dependence on rental income

You should consider how heavily you rely on rental income to cover expenses such as mortgage payments, property maintenance, and taxes.

If your rental property is a significant source of income and any disruption in rental payments would pose a financial strain, rent guarantee insurance can provide peace of mind by ensuring a steady stream of income even if tenants default on payments.

Tenant screening and history

The reliability and financial stability of your tenants will also factor in your decision. If you conducted thorough tenant screening processes, including background checks, credit checks, and rental history verification, then the risk of tenant default may be lower.

Our Tenant Find service gives you the confidence that your property will be let to a qualified, referenced tenant.

Property location and rental market conditions

You should assess rental market conditions and dynamics in your property's location. Properties in areas with high tenant turnover rates, economic instability, or a history of rental arrears may face a higher risk of tenant default.

Benefits of rent guarantee

Steady rental income

One of the main benefits of rent guarantee insurance is that it ensures a steady stream of rental income, even if tenants default on payments. This financial security is particularly important for landlords who rely on their rental income to cover other expenses.

Legal assistance

Many rent guarantee policies include coverage for legal expenses incurred during the eviction process. This can be especially beneficial in cases where tenants refuse to vacate the property or contest eviction proceedings, as it helps cover the costs associated with legal representation and court fees.

Peace of mind

Rent guarantee insurance can provide you with peace of mind, knowing that you have a safety net in place to protect your financial interests. This can alleviate stress and uncertainty, allowing you to focus on other aspects of property management.

Drawbacks of rent guarantee


Rent guarantee insurance premiums can be relatively expensive, particularly for landlords with multiple properties or in high-risk areas. The level of coverage may not always justify the cost of premiums, which can eat into rental profits.


Rent guarantee insurance policies often come with exclusions and limitations that may restrict coverage in certain situations. For example, policies may not cover rental arrears if the tenant is in breach of the tenancy agreement or if the property is vacant for an extended period of time.


Most insurers demand an excess for rent guarantee insurance and the first month of rent default, increasing the cost in the early stages of the policy.

Contact your local Parkers branch for more lettings advice.

Further reading:

The Renters (Reform) Bill and how it could affect you as a landlord

Financial planning for landlords: budgeting and beyond

Why private landlords need an agent now more than ever

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