How to Protect Against Rent Arrears With Insurance
Rent guarantee insurance costs £150–£300 a year and pays out for 6–12 months of arrears plus legal costs. Here's whether it's worth it for your portfolio.
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Introduction
One bad tenant can wipe out two years of profit. Rent guarantee insurance is the single most underused tool in the small-landlord toolkit — paying out reliably for arrears, legal fees and even some void periods. Here's how to decide if it fits your portfolio.
What RGI covers
Monthly rent during arrears, up to 6 or 12 months depending on policy. Legal costs of possession (typically £50,000 limit). Sometimes void period rent after eviction (usually 2 months). What it doesn't cover: damage (that's the deposit and buildings insurance), unpaid bills, or losses before the policy was in force.
Tenant qualification
Insurer-approved referencing is mandatory: passed affordability (typically 30x monthly rent in annual income), no adverse credit, employer reference. Guarantor often acceptable as alternative. If a tenant fails, the policy won't write — you'll know upfront.
Cost
£150–£300 per tenancy for 12-month cover. Cheaper for company lets and longer terms. NRLA and ARLA member discounts available. Fully tax-deductible as a rental expense.
Claim process
Notify insurer at 1 month arrears (don't wait). They assign a panel solicitor who handles the Section 8 / Section 21 process. You provide statements and tenancy docs. Rent payments to you typically begin within 30–60 days of notification and continue until possession is recovered.
Common exclusions
Tenants you placed yourself without insurer-approved referencing. Arrears that began before the policy started. Holiday lets and short-lets. Properties without valid gas safety, EPC, EICR. Lapsed deposit protection. Read the schedule carefully.
When to self-insure
With 4+ properties generating £40,000+ rent annually, you can run a 'rent reserve' equal to 3 months across the portfolio (£10,000+) and effectively self-insure. Above 10 properties most landlords drop RGI entirely. Below 4, the cost-benefit usually favours buying it.
What it isn't
RGI is not income protection — it's loss mitigation. The cash flow benefit is critical: when arrears hit, mortgage payments still go out. RGI bridges that gap. Treat it as part of your risk strategy, not a profit centre.
Final word
Smart Sleep Property handles the heavy lifting — referencing, compliance, deposits, repairs, and full tenancy management across Norwich and Norfolk. Get in touch if you'd like us to handle this for you.
Frequently asked questions
What is the key rule for rent guarantee insurance?+
Rent guarantee insurance (RGI) covers 6–12 months of rent plus legal costs for eviction, if a tenant defaults. Costs £150–£300 per tenancy. Requires referenced tenants meeting income/credit thresholds. Most landlords with 1–3 properties benefit; larger portfolios self-insure via reserves. RGI is not
Does this apply across England?+
Yes — this guide covers England. Scotland, Wales and Northern Ireland have separate but broadly similar regimes.
Where can I get help?+
Smart Sleep Property offers compliance support, document templates and full management for Norwich and Norfolk landlords.
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