FAQ Category: Rent Guarantee
Rent Guarantee Insurance works as a type of landlord insurance which could cover your rental income should a tenant fail to pay their rent. Our policy also provides Legal Expenses cover, which will cover the costs associated with pursuing legal action against your tenants, or defending you if they decide to take legal action against you.
For this insurance to be valid, your tenant(s) must have passed the relevant referencing process in advance of the tenancy commencing. This includes an Affordability Test, proof of earnings, proof of ID and credit referencing showing no CCJ’s in the past 3 years, along with no previous bankruptcies and a good /satisfactory/ pass credit score demonstrating their ability to meet their rent commitments. Further information can be found in the Policy Wording – which is available when you get a quote.
Tenancy Check Requirements:
Where the Tenant(s) have been resident in the Insured property for less than three years, for there to be a valid claim under the Policy, it is a requirement that, prior to the commencement of any tenancy agreement relating to an Insured Property, You must obtain (and provide evidence to Us at the point of claim) for each Tenant and Guarantor (if applicable) the following:
a) A satisfactory credit reference check against the Tenant and Guarantor (if applicable) from a licensed credit referencing agency or from a licensed credit firm. The credit reference check must have been carried out within forty-five days prior to commencement of the Tenancy Agreement. The satisfactory credit reference check must be clear of unpaid court judgements and/or decrees in the last three years, show no previous bankruptcies and provide confirmation that the Tenant meets the applicable criteria of the credit referencing agency as a suitable Tenant.
b) Where the Tenant or Guarantor is employed, confirmation from their employer confirming their gross annual salary and that they have been employed with the company for over 6 months.
c) Where the Tenant or Guarantor is self-employed, you would need to obtain tax returns from them for the last 2 years confirming profit, three months personal bank statements showing earnings, and a letter from their accountant confirming current business income.
d) Where the Tenant or Guarantor derives their income from an Other Income Source, you would need to obtain three months personal bank statements showing earnings, together with evidence from the relevant authority or governing body of eligibility, and the start date and end date of any payments where applicable.
e) In all circumstances, the Tenant’s or Guarantor’s salary or Other Income Source must meet all the requirements of the Affordability Test.
Affordability Test:
The Tenant’s gross annual salary and/or Other Income Source* must be equal to or higher than 30 times the monthly rent. If a guarantor is required, the guarantor’s annual salary or Other Income Source must be equal to or higher than 50 times the monthly rent.
*Other Income Sources include income derived from investments, pensions, a private trust fund or, where a Tenant is employed, any additional income received via Universal Credit or Disability Living Allowance.
We can accept income from any of the following sources: investments, pensions, private trust fund, or where the tenant is employed, additional income received from Universal Credit or Disability Living Allowance. We are not able to accept Child Benefit or Child Maintenance as forms of income.
If your tenant has lived in your property for 3 or more years, and has paid their rent without any issues, you do not need to carry out the listed credit checks. However, in the event of a claim, you would need to be able to provide evidence that the tenant has consistently paid their rent for at least 3 years. If you have not carried out the relevant credit checks, and the tenant failed to pay rent within the first 90 days of the policy, the claim would be declined.