Rent guarantee insurance
Rent guarantee insurance (RGI) is a specialist landlord insurance policy that pays a monthly benefit equivalent to the lost rent when a tenant falls into rent arrears and stops paying. The policy typically pays out once arrears have reached a specified threshold, usually one or two months of missed payments, and continues for a defined claim period, most commonly between 6 and 24 months or until vacant possession is obtained, whichever comes first. Most policies bundle rent guarantee cover with legal expenses insurance, which covers solicitor and court fees involved in pursuing a possession claim under the Housing Act 1988. All insurers providing rent guarantee insurance in the UK must be authorised and regulated by the Financial Conduct Authority.
What rent guarantee insurance covers
Standard policies typically cover the following.
Lost rental income - the core benefit, paid monthly up to a stated cap (commonly £2,500 per month). Payments begin after the specified arrears trigger period and continue until the tenancy is resolved or the claim period expires.
Legal expenses - solicitor fees, court costs, and the cost of serving the correct possession notices under the Housing Act 1988. Under the Renters' Rights Act 2025, landlords must use the statutory Section 8 process for every possession claim, with Section 21 abolished from 1 May 2026. Policies that include legal cover are therefore more valuable now than before the Act came into force, because the Section 8 route is more procedurally complex and slower than Section 21 was.
Void period cover - some policies include a short period of continued payments after the tenant vacates while the property is prepared for re-letting. Cover typically ceases once the property is re-let.
What rent guarantee insurance does not cover
Exclusions are significant and must be read carefully before purchase. Standard exclusions include: arrears that arose before the policy was taken out; tenancies where the landlord failed to carry out proper referencing; void periods between separate tenancies; rent exceeding the policy's monthly cap; and properties that were uninhabitable or in disrepair at the time of letting. The policy does not cover fair wear and tear, malicious damage, or any loss arising from the landlord's own breach of housing law.
Rent guarantee insurance is also distinct from loss of rent cover within a standard landlord buildings policy, which covers lost rental income caused by an insured event such as fire or flood making the property uninhabitable. The two products are different in trigger, duration, and scope, see the August definition of landlord insurance for how they sit alongside each other.
The referencing condition
A universal condition of rent guarantee insurance is that the landlord must have carried out proper tenant referencing before granting the tenancy. Insurers typically require credit checks, identity verification, employment verification, and affordability assessment (tenants are generally expected to earn at least 30 times the monthly rent annually). Referencing must usually have been completed within 90 days of the policy start date. A tenancy where referencing was skipped or inadequately documented will not be covered, the claim will be declined. Landlords using August receive automated reminders when tenancy referencing documents are approaching expiry, helping ensure policy eligibility conditions are maintained throughout the tenancy.
Rent guarantee insurance versus a guaranteed rent scheme
The two products are often confused but are structurally different. Rent guarantee insurance is an insurance policy: the landlord retains ownership and management of the property, pays a premium, and is indemnified if the tenant defaults. A guaranteed rent scheme is a property management arrangement in which a company takes a lease of the property and pays the landlord a fixed monthly amount regardless of whether the property is occupied or the tenant is paying. The landlord trades management control and a share of market rent for income certainty. Neither is superior, the choice depends on a landlord's appetite for management involvement.
The Renters' Rights Act 2025 and RGI uptake
From 1 May 2026, Section 21 no-fault possession is abolished in England. Every possession claim must now proceed through the Section 8 route, citing specific statutory grounds. The process is more formally structured, typically slower, and generates more legal cost than Section 21 proceedings did. This makes the legal expenses component of rent guarantee insurance substantially more valuable, and the period of protected rental income more important, a contested Section 8 claim can take six months or more to reach a hearing. From working with self-managing landlords across the UK, we have seen a clear increase in RGI enquiries since the Renters' Rights Act came into force, particularly from landlords who previously relied on Section 21 as a backstop and now have no equivalent route.
For a full analysis of what rent guarantee insurance covers, typical premium ranges, how to make a claim, and whether it is worth the cost for self-managing landlords, see the August guide to rent guarantee insurance.
Frequently asked questions
Is rent guarantee insurance a legal requirement?
No. It is a voluntary commercial insurance product. It is not required by law, and no landlord is obliged to hold it. However, the abolition of Section 21 possession and the more structured Section 8 route under the Renters' Rights Act 2025 have made it more financially significant than it was under the previous regime.
Is rent guarantee insurance tax-deductible?
Yes. The premium paid for rent guarantee insurance is an allowable expense against rental income for UK income tax purposes, subject to the policy being taken out wholly and exclusively for the purposes of the letting business. This applies to individual landlords under self-assessment and to landlords filing under Making Tax Digital for Income Tax from 6 April 2026.
Do policies cover tenants who receive Universal Credit?
This varies by insurer. Some policies accept all tenant types including benefit recipients, provided referencing criteria are met. Others exclude tenants on benefits or require a guarantor. The requirement to assess applicants on individual merits rather than blanket exclusions is consistent with the Renters' Rights Act's discrimination provisions, but the specific eligibility conditions are set by the insurer, not by statute.
What is the typical cost of rent guarantee insurance?
Premiums vary by property, location, monthly rent, and the level of cover. A standalone rent guarantee policy typically costs between £120 and £250 per year. Legal expenses cover bundled with rent guarantee adds to this cost. As a rough benchmark, £150 to £400 per year covers most standard single buy-to-let properties with combined RGI and legal expenses cover.
Who are the best rent guarantee insurance providers for landlords?
Our separate guide to the best rent guarantee insurance providers compares six UK providers on cover limits, legal expenses and referencing requirements.
