Can Rent Guarantee Insurance NOT pay out?

Landlords, Lettings

I have decided to write this blog to give landlords a true insight into Rent Guarantee Insurance. Here at Keystones, we meet hundreds of landlords every year and manage many rental properties for our landlords. From portfolio landlords to accidental landlords, we help them all! Therefore, we know the vast spectrum of a landlord’s makeup.

We advise our landlords every year to protect themselves with Rent Guarantee Insurance, but even after we’ve explained the (many) benefits, we still only have approximately 70% of landlords opting in for Rent Guarantee Insurance.

I like to equate it to needing a new roof, you only need a new roof if it rains. It is the same with Rent Protection, you only need the insurance if the tenant doesn’t pay rent and some landlords have even said to me in the past that ‘they don’t even pay out anyway!’

This was intriguing for me because we have only used 4 insurances in the 10 years from 2013 – 2023 that Keystones has been trading, 3 of them during Covid and on all 4 times we have managed to get our landlords paid (we are more than happy to supply names and numbers upon requests to anyone who wants to find out from these landlords).

Personally, I have my own portfolio of buy to lets and take Rent Guarantee Insurance every single time without fail even though one of my tenants has been in one of my properties for years and has never been late. I protect myself because I have seen it work before my own eyes!

Which begged me to ask some of these landlords that think that it doesn’t work, why?

When I probed into it, I found a few reasons why, so here are some tips on how NOT to get tripped up and make sure that you do your own due diligence so that your Rent Guarantee does pay out.

1. Read your Policy Wording

Sounds so simple, but it is true. How many landlords have the time or can be bothered to read a 30-page policy wording full of small print legal jargon until it is too late.

Not many. If you look at it realistically, when you do the update on your Smartphone where it sends you a whole range of terms and conditions to do the latest download to update on your phone, no one reads it and if you do, you’ve not read it in much detail or you’re a liar. But the truth is that we could be signing our lives away by pressing the ‘accept’ button. But we do it because we trust these big corporations.

My advice on Rent Guarantee Insurance is to read the small print, the gold is in the detail.

At Keystones, we read it, and all the property managers, branch managers and lettings managers thoroughly read the updates every 6 months to keep up to date as we are responsible for many landlords’ properties.

Depending on the insurance company will depend on the wording which all differ.

I had one landlord who managed privately and took his policy out with his insurance broker who didn’t read the small print until he needed to claim during Covid. The wording said that he needed a previous landlord’s reference, but his tenants were living at home with their parents before renting his house.

His argument was they don’t have a landlord’s reference because of this, the insurance company didn’t want to pay out. Eventually, they did but it made our landlords life very difficult and his insurance broker didn’t want to know.

2. Bad Track Record

This brings me onto my next point. Insurance companies are in business because they play a numbers game, they hope that they never have to pay out and if they do it will be on a small percentage of what they take in and they will try to make it difficult so that they can ‘get out’ of paying.

Always use an insurance company with a good track record, look at reviews online and speak to experts who know who the insurance company is.

Do not just use the cheapest insurance company going.

At Keystones, we use a middle of the range company and at present is backed up by Aviva who we all know is a major insurance company, plus we know upon evidence that they pay out provided you have read your policy wording and adhered to the policy.

3. Referencing Process

A lot of Rent Guarantee Insurers will not pay out a tenant if the referencing process was not done correctly.

At present our insurer wants quite a lot of things handled correctly in the initial stage of the preparation process such as:

• Checking all the occupants over 18 years on the agreement for CCJs, Defaults, Bankruptcy, and general bad credit.
• All IDs and Visas on file and approved in the correct manner
• The Right to Rent Checks done
• Affordability checks approved
• Previous landlord reference checks approved
• An established reference company approve the reference as a pass on affordability and/or a guarantor
• How to Rent Booklet given to tenant upon move in
• Deposit Protected inside a Scheme with a Prescribed Information Document given to a tenant to sign
• Annual Gas Safety, EICR Certificate Passed, EPC Rating approved and passed
• The Correct Legal Documents and agreements

As you can see a lot that could go wrong, which is why it is more important to get the right process and systems in place so that if you need to make a claim, the preparation is done, and the claim will pay the landlord out.

4. A Good Letting Agent or Landlord

Whether you are doing this alone or using a letting agency, make sure you do this stage correctly. As you can see from the above there is a lot of detail and a huge process.

Housebuilding at present in the UK is vibrant, homelessness is more than it has ever been, the court rooms are busier than ever, and the government has waiting lists upon waiting lists of housing benefit tenants needing homes.

If you haven’t prepared correctly then prepare to fail and not be able to claim your Rent Guarantee Insurance, prepare for you to be chucking thousands of pounds down the drain whilst your tenant is not paying.

The government and the system will NOT look after you as a landlord.

See my blog on Rent Guarantee Insurance and why this is important that you do it right.

5. Ignored Maintenance

It is law in this country you have a level of care you owe to your tenants when renting a property out. At Keystones we have rejected many rental properties because we don’t agree with the moral compass of some landlords and don’t think we will attract the right tenants for them.

As I have said to many of landlords before; ‘if you rent someone a pigsty, then you will attract yourself a pig!’

Being a landlord is offering a paid service to tenants, there is a line but a landlord’s duty of care towards a tenant for a good, hygienic, and well-maintained accommodation is paramount to this.

If there are any major disputes on maintenance, then you will not be able to evict your tenant.

Major are things such as Electrics, Gas, Water and Cooking facilities. Things such as aggressive black mould will also be classed inside this. If you as a landlord are neglecting your responsibilities towards your tenants then a judge in a courtroom will not look at your favourably and therefore when it does come to claiming your Rent Guarantee Insurance Policy, they will not pay you out.

If you are not sure where the land lies on what has ignored maintenance and your tenant unnecessarily complaining, then speak to our team of experts at Keystones and we will be able to advise you best on this.

As mentioned, before we manage hundreds of properties and can usually decipher this inside a conversation with you or put you on to the right legal professionals if the situation is getting a bit too sticky.

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