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I came across an article in Lovemoney the other day analizing the value of rent guarantee insurance.Pretty shocking reading that puts some rent guarantee insurance policies up there with some of the worst rip off financial products of the past decade.
They looked at the figures on the NLA rent guarantee insurance policy and showed that it had a claim ratio of 13.5%, which basically means that it pays out just 13 pence for every pound taken in.
This compares to average car insurance policies that sit at about 80%.
The article also outlines the long list of exclusions which means that unless a landlord is wearing the correct colour socks, has trod on every crack in the pavement and has met at least four of the tenants relatives then an exclusion clause will be found that prevents any pay out.
So, would I recommend a landlord getting rent guarantee insurance?
Well truth be told ( and remember this site pays for itself by trying to sell insurance to landlords ),........... probably not.
Unless a landlord is living on such a financial tightrope that a period of unpaid rent would bring down their whole financial house of cards, take the risk.
Rent guarantee insurance is a costly route akin to the rip off insurance policies that are sold on domestic appliances, but that's just my opinion.
For more info on this read this enlightening article in Lovemoney.
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2 comments:
The biggest drawback with these policies is that a Landlord is only covered until the end of the tenancy period. So, unless the tenant defaults in the first 6 month the Landlord is likely to give them 2 months notice to leave under the terms of the break clause - therefore the guarantee will only cover the rent up until the date that the tenant is due to leave and not the 6 months that it takes to get to court and instruct bailiffs.
I would agree - spend more time on the referencing process and give the insurance a miss.
I find it bizarre that you cannot get rent guarantee insurance without doing proper tenant referencing.
So if you get the referencing done and they pass then it's "OK" for the RG company to accept the risk.
But if they don't pass the referencing then it's evidently not "OK".
Now, what a surprise!
So, turning this to our advantage: if I get the referencing done myself and they pass then it's OK for ME to take the risk and if they did not pass then it's not OK for ME neither. (In other words I tell the prospective tenants to look elsewhere).
So if the test of the referencing process works for the RG company then it works for me - without the need of the RG insurance - and I get to save hundreds of pounds per year on policies that I would statistically never claim against!
Obviously the referencing process is not always so clear-cut and if it comes back as a "refer" to further checks then you still have to make the judgement. Being the cautious type I do my own further checks but if I suspect anything dodgy I send them away.
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