What Is Rent Guarantee Insurance?

Rent guarantee insurance reimburses landlords for income lost when a tenant defaults on rent payments. The insurance pays the monthly rent for a set period if the tenant stops making🍃 payments.

This type of 澳洲幸运5官方开奖结果体彩网:risk management product is relatively neꦇw to the United States. The practice was imported from Great Britain.ও

Understanding Rent Guarantee Insurance

Individuals and companies who lease property can obtain several types of insurance policies to protect against losses. The buildings and their contents can be insured against loss or damage, and some policies w♑ill cover the legal costs of evicting a tenant. ൩These policies generally do not include reimbursement of costs associated with non-payment of the rent by tenants.

Rent guarantee insurance addresses that particular need. The policies are designed to protect a landlord's income if a tenant defaults.

Much like 澳洲幸运5官方开奖结果体彩网:private mortgage insurance (PMI), rent guarantee insurance offers protection to the landlord rather than the tenant. If the tenant stops paying rent, the insurance carrier, acting as 澳洲幸运5官方开奖结果体彩网:guarantor, covers t𝔉he rent for a length of time specified in the contract.

Tenant Remains Liable

Whether or not a landlord has rent guarantee insurance, a tenant who stops paying rent remains liable for the rent owed and any legal fees. The guarantor can initiate legal proceedings against a delinquent tenant, including eviction and reporting to 澳洲幸运5官方开奖结果体彩网:credit agencies.

The extent of the tenant's liability is determined by state and local laws.

Who Needs Rent Guarantee Insurance?

Some landlords might decide not to fork out money on rent guarantee insurance, depending on the♔ quality of their tenant screening processes to ensure payment.

Circumstꩲances can change, however. Tenants may lose their jobs, get divorced, or be offered a job in another state.

When a landlord relies on rental income to pay the mortgage🍎 or fund ❀other expenses, a tenant's failure to pay can have serious implications. 

Rent guarantee insurance should not be confused with guaranteed rent agreements. Guaranteed rent contracts allow landlords to sign over the management of their property to a company or 澳洲幸运5官方开奖结果体彩网:real estate agent in e𓃲xchange for a pre-agreed payment. In such cases, the owner would be paid even if the property is empty or the tenant defaults.

Limitations of Rent Guarantee Insurance

Insurers do not hand out rent guarantee insurance without doing their due diligence. That means that if a tenant has a history of defaulting on payments, a🍃n application to protect their rental payments will likely be rejected.

Mo🌱reover, for a landlord to qualify fo♛r such a policy, the tenant will need to have a steady job, earning enough to comfortably pay the rent on the property they lease. Failing that, the insurer will demand that a guarantor be in place to cover any shortfalls.

When the Coverage Kicks In

Rent guarantee insurance generally begins after one month of non-payment by the tenant. It is possible to buy a policy without any time lag, though the premiums are higher.

In any case, the tenant's 澳洲幸运5官方开奖结果体彩网:scurity deposit is often sufꦗficient to cover thꦿe first month's loss.

The Bottom Line

If you're a landlord, you might consider getting rent guarantee insurance in addition to the standard landlord insurance you maintain to protect your property. Even the most reliable tenants can experience personal or financial events that leave them unable to meet their rent payments. If you rely on that monthly rent income to keep your business humming, rent guarantee insurance is a good investment.