What is ‘rental guarantee’ and do I need it?

Renting a property out always comes with risks, and one of the main risks for any property investor is a tenant not being able to pay rent and falling into arrears. Rental guarantee is a form of insurance that covers rent if a tenant defaults on payments. This can provide additional protection and peace of mind.

What does rental guarantee cover?

Rental guarantee covers rental income for landlords when a tenant is unable or unwilling to pay rent. This kind of insurance policy helps ensure landlords and investors aren’t left short. If a tenant faces financial difficulty, they could be unable to make rental payments for several months. 

When letting out a property, non-payment of rent from a tenant is always a risk. And there are a number of reasons why a tenant may not be able to pay their rent – no matter how many checks have been undertaken. For example, a tenant may lose their job or face challenging personal or family circumstances.

The benefits of rental guarantee

A tenant falling into rent arrears can cause financial challenges for landlords. However, rental guarantee can give landlords a safeguard in case tenants are unable to pay their rent. As many landlords and investors rely on monthly rental income in order to pay mortgage payments, rental guarantee insurance can provide peace of mind.

Any tenant could face financial difficulties. Even the most respectful tenants can have their circumstances change unexpectedly, which could result in them not being able to keep up with rent. And this is especially the case in the wake of the COVID-19 pandemic as many people face financial and job uncertainty.


This type of insurance isn’t a legal requirement. However, it can provide extra protection for landlords and investors. And this is especially beneficial for portfolio landlords. On top of that, it can take some of the stress out of renting your property out, allowing landlords to secure monthly income.

How to decide if it is for you

If you rely on rental payments to pay your mortgage or other bills and can afford the cost of the insurance, it can be worthwhile to invest in rental guarantee. It’s important to consider if you would be able to keep paying your bills if you were to lose rent payments.

This type of insurance policy can be particularly valuable to take out for new tenants you don’t have an established relationship with yet. Additionally, it is beneficial to have rental insurance in place at the beginning of a tenancy, especially as some policies don’t let you claim until 30 to 90 days after the policy’s start date.


The costs of rental guarantee insurance depends on a range of factors. It typically depends on the monthly cost of rent and how risky the insurance provider deems the tenant to be. The amount of monthly income you’d receive through the policy is usually agreed beforehand. When figuring out if rental guarantee insurance is right for you, assess your financial needs and decide what is best for your circumstances.

Different insurance policies

The details covered in rental guarantee coverage vary dependent on specific policies and providers. Check the full details of any policy, including conditions, exclusions and limitations,  before signing up and make sure you have the coverage you need.

With rental guarantee, nearly all insurance policies require references to be carried out prior to the tenant moving in. Sometimes a registered guarantor may need to be in place as well. Additionally, there is usually a cap on how many months missed rent the guarantee will cover. Some rental guarantee insurance policies also have set deferral periods when you aren’t able to claim. To claim, you usually need to pay an excess, which is typically one month’s rent.

Rental guarantee insurance policies are usually available for six and 12-month tenancies. Some policies only pay out once the landlord serves a Section 21 or Section 8 notice. With assured shorthold tenancies, landlords can evict tenants by using a Section 21 or Section 8 notice, or both. A Section 21 notice is used to evict a tenant either after a fixed term tenancy ends or during a tenancy with no fixed end date. A Section 8 notice is used when a tenant has broken the terms of the tenancy.

Often rental guarantee insurance is confused with other kinds of insurance. Rental guarantee covers non-payment of rent because a tenant either will not or cannot pay. On the other hand, rental income protection covers the amount a landlord would have received in rent during an unoccupied period following an insured event, like a fire or flood. Additionally, unoccupied property insurance covers void periods when a rental property is sitting empty without tenants.


There are a range of other insurance policies available for landlords and investors. This includes buildings insurance, contents insurance, legal expenses insurance and liability insurance. Buildings insurance is typically a requirement of getting a mortgage on a property. There are also varying landlord insurance policies that offer a range of coverage.

Providing peace of mind

The COVID-19 pandemic has brought challenging times for everyone in the past year, and this includes landlords and tenants alike. Some tenants have struggled paying rent due to losing their job, and landlords have worried if they’ll receive rent payments to be able to pay off their monthly bills.

Rental guarantee can help landlords continue to receive rental payments even if their tenant loses their job or is furloughed. This could prove to be especially helpful moving forward as unemployment rates could hit the highest level when the furlough scheme expires at the end of April.

At Chestertons, we can provide rental guarantee insurance on properties in London through our property management service. Our landlords and investors have been able to secure monthly payments when their tenants haven’t been able to pay rent, providing help with the risks that are traditionally associated with letting our properties.

At a property in Wembley, we were able to secure a rental guarantee of 86% of the rent per calendar month. The rental guarantee policy through our property management package helps landlords face no voids, no arrears and no hassle, providing a fixed yield. This is especially helpful for portfolio landlords and overseas investors, allowing them to have a more hands-off investment and bringing less stress and more peace of mind.


For more information about the rental guarantee scheme available for Signia Court, register your details at the link here

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