Rent Guarantee Insurance (Tenant Default) Explained

Rent guarantee insurance, sometimes called tenant default insurance, pays a landlord’s rent when a tenant stops paying. If a tenant falls into arrears, the policy covers the unpaid rent up to a set monthly limit and period, and usually the legal costs of recovering possession. It protects the income a buy-to-let depends on, and is normally taken alongside proper tenant referencing.

For most landlords the mortgage and costs still have to be paid whether or not the rent arrives. Rent guarantee cover exists to bridge that gap when a tenant defaults, so a single non-paying tenant does not put the whole investment under strain.

What does rent guarantee insurance cover?

It covers the rent a defaulting tenant fails to pay, up to a monthly amount and for a maximum period set by the policy, and typically the legal expenses of pursuing arrears and gaining possession. Some policies continue to pay for a period after possession is recovered, while you re-let. It is income protection for the landlord, not cover for damage to the property, which sits under the buildings and contents sections of a landlord policy.

How is rent guarantee different from a deposit?

A deposit is a small, capped sum that rarely covers more than a few weeks of a serious default, and it is protected in a scheme with rules on how it can be used. Rent guarantee covers ongoing arrears over months and the cost of eviction, which a deposit cannot stretch to. They address different scales of problem.

What conditions usually apply?

Insurers normally require that the tenant was properly referenced and passed, or has a guarantor, before cover applies, and that a formal tenancy agreement is in place. Claims usually begin once arrears reach a set point, often around a month, and the policy will have a monthly cap and a maximum claim period. Meeting the referencing conditions is what keeps the cover valid.

Is rent guarantee insurance worth it?

It depends on how exposed you are to a void or a default: a landlord relying on the rent to cover a mortgage has more to protect than one who does not. The cost is modest against the risk of months of unpaid rent plus eviction costs, which is why many landlords treat it as core rather than optional.

Getting the cover right

Rent guarantee works best set up alongside the rest of a landlord policy and with referencing that meets the insurer’s conditions. A broker can make sure the cover and the tenancy process fit together. To review your property cover, call 01795 841 310 or speak to the team.

Who rent guarantee insurance suits

It suits any landlord who could not comfortably absorb several months without rent plus the cost of recovering the property. Typical examples:

• A landlord with a buy-to-let mortgage in Manchester whose rent covers the monthly payment. Three missed months means paying the mortgage from savings.
• An accidental landlord letting one flat. There is no other rent coming in to absorb a default.
• A portfolio landlord who wants arrears and possession costs handled by the insurer’s legal panel rather than managed case by case.
• A landlord using a letting agent. Agents often offer cover tied to their own referencing. Check whose name the policy is in and what happens if you change agent.

One option has narrowed in England. Landlords can no longer take several months’ rent up front from a tenant who cannot pass referencing, because rent in advance is now capped at one month. That makes referencing, guarantors and insurance more important.

What rent guarantee insurance typically does not cover

• Tenants who were not referenced to the insurer’s standard, or who did not meet it without a guarantor.
• Arrears that existed before the cover started. Cover for an existing tenancy usually needs a clean payment record first.
• Cases where you have not met your legal duties. In England, a court cannot make a possession order on most grounds if the deposit was not protected, and insurers may decline the legal costs of a case that cannot succeed.
• Disputes about the property’s condition. Where the tenant withholds rent over disrepair, the policy may require repairs to be dealt with first.
• Damage, bills and service charges. These belong to the buildings and contents sections of a landlord policy, or to the tenant.
• Rent beyond the monthly limit or maximum period shown in the schedule.

The Renters’ Rights Act 2025 and rent guarantee cover

The Renters’ Rights Act 2025 changed the possession process in England from 1 May 2026. Wales, Scotland and Northern Ireland have their own systems.

• Section 21 has gone. No new section 21 notices can be served. Possession for arrears now relies on the section 8 grounds.
• Ground 8 is mandatory. It needs at least three months’ rent owed where rent is paid monthly, or 13 weeks’ rent where it is paid weekly or fortnightly. The arrears must be at that level both when notice is given and at the hearing, and the notice period is four weeks.
• Grounds 10 and 11 are discretionary. They cover any arrears and persistent late payment, also on four weeks’ notice, but the court must think possession reasonable.
• Universal Credit. Arrears that exist only because Universal Credit has not yet been paid do not count towards ground 8.
• Guarantors. GOV.UK guidance says guarantor agreements made before 1 May 2026 may be affected by the reforms and should be reviewed.
• The landlord database. Once registration is in force, unregistered landlords will not be able to obtain possession on most grounds.
• Insurance terms on benefits and children. A term in an insurance contract entered into or renewed from 1 May 2026 that would require you to refuse tenants who claim benefits, or tenants with children, has no effect.

For rent guarantee, the effect is that the legal expenses section now funds a section 8 case rather than a section 21 one. Check that your wording refers to the current grounds and notices, and that the claim trigger works alongside the ground 8 threshold.

What affects the premium

Prices vary with the cover chosen. Insurers usually look at:

• The monthly rent and the monthly limit you want covered.
• The maximum claim period and the legal expenses limit.
• The excess, often expressed as the first month of arrears.
• The referencing standard and whether a guarantor is in place.
• Whether the tenancy is new or already running.
• The number of tenancies insured and your claims history.
• Whether the tenancy is a single let or a shared house.

How a rent guarantee claim works

1. Rent is missed. Contact the tenant and keep a clear rent statement.
2. Notify the insurer early. Most policies set a deadline for reporting arrears. Missing it can affect the claim.
3. Provide documents. Usually the tenancy agreement, referencing report, deposit protection certificate, rent statement and your safety certificates.
4. Notice is served. The insurer’s solicitors usually prepare and serve the section 8 notice on the prescribed form, Form 3A, citing the right grounds.
5. Court proceedings. If the tenant stays after the notice expires, the solicitors apply for a possession order. The court fee for this rose to £415 on 13 July 2026, and legal expenses cover usually meets it.
6. Rent is paid monthly under the policy, up to the limit, until possession, the maximum period, or the arrears are cleared.
7. Enforcement. If the tenant does not leave by the date in the order, enforcement officers may be needed, which the legal costs section usually funds.

A worked example

This example is hypothetical.

A landlord in England lets a flat at £1,100 a month to a fully referenced tenant. The policy pays rent up to £1,500 a month for up to twelve months, with an excess of the first month.

The tenant loses their job and stops paying in March. The landlord reports the arrears within the policy deadline. Once three months are owed, the insurer’s solicitors serve a section 8 notice relying on ground 8 and the discretionary grounds. Proceedings follow when the four weeks run out.

The policy pays £1,100 for each month of arrears after the excess while the case runs, and the legal costs section funds the solicitors and court fee. Possession is recovered and the claim closes. Had the deposit not been protected, the case could have stalled.

Frequently asked questions

Does rent guarantee insurance still work now section 21 has gone?

Yes, in England it now works through section 8. The legal expenses side funds a possession claim on the rent arrears grounds instead.

How long does rent guarantee insurance pay for?

Up to the maximum period in the schedule, or until possession is recovered or the arrears are cleared, whichever comes first.

Can I insure an existing tenancy?

Often, yes. Insurers usually want the tenant referenced and a clean payment record for a set period before cover starts.

Do I still need it if the tenant has a guarantor?

A guarantor gives you someone to pursue but does not fund the eviction. Many landlords use both.

Will it cover a tenant who receives Universal Credit?

It can. In England, an insurance term requiring you to refuse benefit claimants has no effect in contracts made or renewed from 1 May 2026, though referencing rules still apply.

Is rent guarantee the same as landlord insurance?

No. Landlord insurance covers the building, contents and liability. Rent guarantee covers rent lost to tenant default and the cost of recovering possession.

See also: What is tenant default insurance and what does it pay?.

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