Insurance
Rent guarantee insurance: cover, cost and claims | August
Rent guarantee insurance: a complete guide for UK landlords
Rent guarantee insurance pays a landlord's lost rental income when a tenant stops paying, and most policies also cover the legal costs of recovering possession. It is one of the most practical financial protections available to UK landlords, and since the Renters' Rights Act 2025 commenced on 1 May 2026 it has become more relevant, because the only route to possession for arrears now runs through the courts and that takes months. This guide explains what the cover includes, what it costs in 2026, who is eligible, how a claim works, and whether it is worth it for your portfolio. It is general information, not financial or legal advice.
What is rent guarantee insurance?
Rent guarantee insurance, also called landlord rent guarantee insurance, RGI, or tenant default insurance, is a specialist policy that pays out when your tenant falls into arrears and stops paying. It covers the lost rent for a defined period, usually 6 to 24 months, while you resolve the situation or regain possession. The term is distinct from a council or insurer "rent guarantee scheme", which is a separate arrangement aimed at housing benefit tenants; this guide covers the insurance product landlords buy to protect their own income.
Most policies bundle rent protection with legal expenses cover, which pays the solicitor and court fees of a possession claim. Together those two elements can save a landlord tens of thousands of pounds in a serious arrears dispute, which is why the combined product is sometimes sold as legal expenses and rent guarantee, or LERG.
What does rent guarantee insurance cover?
Cover varies between insurers, but a standard policy includes two core elements and, often, a third.
Rent protection. The policy pays a monthly benefit equal to your lost rent, up to a cap that is commonly £2,500 a month. Payments usually begin once the tenant has been in arrears for a set period, often one or two months, and continue for the claim period or until you can re-let, whichever comes first.
Legal expenses. This pays solicitor costs, court fees and bailiff or enforcement costs for a possession claim, typically up to a limit of £50,000 to £100,000. In England and Wales, eviction proceedings can cost £1,500 to £5,000 in legal fees alone, so this element usually matters more than the rent benefit.
Void cover. Some policies pay a short benefit for a void period after the tenant leaves while you prepare the property to re-let.
What is typically excluded?
Read the exclusions before buying. Most policies will not pay if tenant referencing was not completed before the tenancy began, if the arrears pre-date the policy, if the tenant was known to be in financial difficulty at the point of underwriting, if the property is an unlicensed HMO that should be licensed, if the tenancy is not an assured tenancy of the kind the policy covers, or if the claim is not reported within the required window, often 30 to 60 days of the arrears arising.
How much does rent guarantee insurance cost?
In 2026, rent guarantee insurance typically costs between 2.5% and 5% of the annual rent, which works out at roughly £150 to £300 a year for a standard single-let, or around £15 to £25 a month. On a property let at £1,000 a month, expect £300 to £600 a year for combined rent and legal cover. Some insurers charge a flat monthly rate regardless of rent. Standalone legal expenses cover, if bought separately, usually adds £50 to £100 a year.
Premiums depend on the monthly rent, the property location, the excess, the length of cover, and whether you buy standalone or as an add-on to a landlord insurance package. Bundling is often cheaper; a standalone policy is sometimes more tailored. It is worth getting both quotes.
Is rent guarantee insurance worth it?
For most landlords who rely on the rent to cover a mortgage or who could not absorb several months without income, the answer is yes, because the cost of the cover is small relative to the loss it protects against. A single serious arrears case can run to a year of unpaid rent plus several thousand pounds in legal fees, against a premium of a few hundred pounds. The case is weaker for a landlord with no mortgage and ample reserves, who is effectively self-insuring a risk they can afford to carry. The deciding factors are your exposure to a few months without rent, the strength of your tenant vetting, and whether you would rather pay a predictable premium than carry an unpredictable loss.
How does rent guarantee insurance work?
You buy the policy at the start of a new tenancy or at renewal, providing evidence of a satisfactory tenant reference, and the insurer keeps it in force for the tenancy. If the tenant stops paying, you notify the insurer and submit a claim.
How to make a claim
The tenant misses a payment. Note the date and keep the rent record.
Issue a formal late rent notice. This creates a paper trail and is often a policy requirement.
Attempt to resolve the arrears in writing, and document every communication.
Notify your insurer, usually within 30 to 60 days of the first missed payment. Check your wording.
Submit evidence: the tenancy agreement, the reference report, the rent account, and your communications with the tenant.
Once approved, the insurer pays the monthly benefit directly to you.
If the legal expenses element is triggered, the insurer's solicitors manage the possession claim.
Late notification is one of the most common reasons claims are refused, so do not wait. Insurers also lean heavily on the rent account: they want to see exactly what was due, what was paid and when. A clean, timestamped rent ledger is exactly what an insurer asks for, and what a court needs for a Ground 8 claim, so rent tracking that records every payment as it lands removes the most common friction from both processes.
Eligibility requirements
Rent guarantee insurance comes with conditions that must be met at underwriting. Miss them and a claim can be declined when you need it most.
Tenant referencing
This is the single most important condition. Almost every insurer requires the tenant to have passed a full reference before the tenancy started: a credit check for CCJs, IVAs and bankruptcy, income verification against an affordability test of roughly 2.5 to 3 times the annual rent, a previous landlord reference, and identity verification. Keep the full report, because the insurer will ask for it on a claim. Our guide to tenant referencing sets out what good vetting looks like.
Tenancy and property
The tenancy must usually be an assured tenancy. Every assured shorthold tenancy converted to an assured periodic tenancy on 1 May 2026, and reputable insurers have updated their wording accordingly; check that yours refers to the current structure. The property must be in England or Wales, with some policies extending to Scotland on different terms, and many cap the monthly rent they will cover without a specific endorsement.
Rent guarantee insurance vs rent protection insurance
The terms are often used interchangeably, but rent guarantee insurance is the broader product that combines rent payments with legal expenses cover, while rent protection insurance sometimes refers to the rent element alone. Compare what is actually included rather than the label. It is rarely worth covering the rent but not the legal cost of recovering possession, so the bundled product is usually the better buy.
Rent guarantee insurance vs a guarantor
A guarantor is a third party, often a parent, who agrees to cover the rent if the tenant cannot. Guarantors suit student lets and tenants with limited credit history, but they differ from insurance in important ways. Enforcing against a guarantor who refuses to pay still means legal action, whereas an insurer pays to defined terms. A guarantor may simply lack the means to pay; an insurer's capacity is contractual. And recovering money from a guarantor is left entirely to you, while an insurer manages the legal process. Many landlords use both: a guarantor as an extra safeguard for a higher-risk tenant, and a policy for consistent protection across the tenancy.
Do you need rent guarantee insurance after the Renters' Rights Act?
The Renters' Rights Act 2025, in force since 1 May 2026, has made this cover more relevant, not less. With Section 21 no-fault evictions abolished, the only route to possession for arrears is the Section 8 grounds framework, and the thresholds have tightened. Mandatory Ground 8 now requires three months' arrears, up from two, at both the point of serving notice and the date of the hearing, with a four-week notice period, per the gov.uk guidance on the Act. Arrears caused by delayed Universal Credit are excluded from the Ground 8 calculation. The Act also introduced a ground addressing repeated serious arrears, so a tenant who clears the balance just before a hearing to defeat Ground 8 can still face possession on the discretionary grounds.
In practice a straightforward arrears possession now means serving a valid Section 8 notice on the prescribed form, issuing proceedings if the tenant does not leave, attending a hearing, obtaining a possession order and applying for a warrant. From first missed payment to vacant possession can take six to twelve months or more given court backlogs, which is precisely the gap rent guarantee insurance is designed to bridge. Each available ground is explained in our guide to grounds for possession in 2026, and the realistic timeline in our guide to evicting tenants in arrears and court timelines.
How to choose the right policy
Before committing, ask: Does the monthly cap cover your actual rent? Is the maximum claim period at least 12 months, ideally 24, given how long possession takes? Is there an excess period that excludes the first month or two of arrears? Are legal expenses included, and if not, what does adding them cost? Can you meet the insurer's referencing standard? Is the policy per property or can a portfolio be covered at a reduced rate? And what is the insurer's claims-handling reputation? Check that the provider is authorised on the FCA register before you buy. If you want to compare specific providers, see our roundup of the best rent guarantee insurance for UK landlords. Rent guarantee sits alongside buildings, contents and liability cover in a complete setup, covered in our guide to what landlord insurance you need.
What about rent guarantee insurance for tenants?
Some products marketed as "rent guarantee insurance for tenants" are deposit-replacement or guarantor-substitute schemes a tenant pays for to satisfy a landlord's referencing. These are a different product from the landlord-purchased cover this guide describes, and a landlord relying on one should confirm it actually pays the landlord on default rather than simply lending the tenant the arrears.
Common questions about rent guarantee insurance
Can I get rent guarantee insurance mid-tenancy?
Some insurers offer mid-tenancy cover if the tenant passed a satisfactory reference and is not currently in arrears, but most prefer the policy in place from the start. Confirm with the insurer before assuming cover is available.
Does rent guarantee insurance cover damage to the property?
No. Property damage is covered by landlord buildings and contents insurance, a separate product. Most landlords need both.
Can I claim if the tenant abandons the property?
Most policies cover abandonment, but you must follow a defined process to confirm it, usually attempting contact, checking for occupation and getting the insurer's approval before re-entering. Check the wording.
Is rent guarantee insurance tax-deductible?
Yes. The premium is an allowable business expense, deductible from rental income before tax. See our guide to allowable expenses for landlords.
Do I need it if I use a managing agent?
Yes, unless the agent offers a specific guaranteed-rent service. Standard management does not guarantee your rent, so you still need a separate policy whether you self-manage or use an agent.
Does it cover a lodger?
No. A lodger is usually a licensee rather than a tenant, and lodger arrangements are excluded from most policies, which are designed for assured tenancies.
When you do claim, the insurer and the court both want the same evidence: the reference report, the tenancy agreement, your communications, and a complete rent record. You can keep it all in one place with August so the paperwork is ready the moment you need it.
Key takeaways
Rent guarantee insurance pays lost rent and legal costs when a tenant stops paying, making it one of the most practical protections available to UK landlords.
It typically costs 2.5% to 5% of annual rent (around £150 to £600 a year) and covers 12 to 24 months of arrears, often with a void benefit.
A satisfactory tenant reference before the tenancy starts is a prerequisite; without it, a claim will almost certainly be refused.
The Renters' Rights Act 2025 makes the cover more important, because possession for arrears now runs through Section 8 (three months' arrears for Ground 8) and can take six to twelve months or more.
Compare policies on monthly cap, excess period, claim duration, legal expenses inclusion, and claims reputation, and check the insurer is FCA-authorised.
Premiums are tax-deductible as a landlord business expense.
For a practical, step-by-step approach to arrears before a claim arises, see our complete guide to rent arrears.
This article is general information and does not constitute legal, financial or professional advice. Landlord and tenant law changes, and this reflects the position at the time of writing (June 2026). Always seek independent advice before acting in relation to your property or tenancy.
Author
August Team
The August editorial team lives and breathes rental property. They work closely with a panel of experienced landlords and industry partners across the UK, turning real-world portfolio and tenancy experience into clear, practical guidance for small landlords.
