Rent Guarantee Warranty vs Rent Protection Insurance: Which is best for you?

Rent Guarantee Warranties and Rent Protection Insurance sound similar, but there are some important distinctions you need to know about.

For example, while warranties can be more cost-effective, they’re not regulated. This increases the risk for anyone in such an agreement. 

By contrast, Rent Protection Insurance is standardised and regulated, reducing risks for customers. Because of this, it’s taxed, making it more expensive. 

In this blog, we’ll outline all the key differences between the two and help you come to a decision about which coverage is best for you, with the Renters’ Rights Bill only months away.

Rent Guarantee Warranty vs Rent Protection Insurance: Key differences

What is a Rent Guarantee Warranty?

A Rent Guarantee Warranty is a contractual service ensuring landlords receive rent if tenants default or miss payments. As with any warranty, there’s an element of good faith required on the provider’s part to uphold their end of the bargain if something goes wrong.

This helps explain why their coverage is narrower in scope than Rent Protection Insurance. Most importantly, Rent Guarantee Warranties are unregulated, impacting every facet of their service. We explore this below:

PRoduct structure

While the wording of warranties is subject to legal compliance, it doesn’t have to meet the FCA’s criteria. This means your warranty may not be comprehensively explained to you, and you might not fully understand what your protection is.

The benefits offered by Rent Guarantee Warranties are also at the discretion of the provider.

Legal Recourse

Because Rent Guarantee Warranties aren't regulated, customers — whether they're letting agents or landlords — have little to no rights of legal recourse. This means you can't appeal to the Financial Ombudsman if you're unhappy with your service.

Claims process

Rent Guarantee Warranties aren’t underwritten by insurance companies. As a result, you deal directly with the business to manage any claims you make, which can be problematic. 

Firstly, providers may be reluctant to pay out because they have to dip into their coffers. Secondly, warranties typically favour providers to reduce their liability. And thirdly, you could be left without coverage if your provider becomes insolvent.

Cost

Of course, Rent Guarantee Warranties have upsides. Because companies that provide them avoid the red tape of regulation and taxation, they can offer cheaper deals to consumers.

Risk

When assessing the suitability of your Rent Guarantee Warranty, it’s worth considering the Renters’ Rights Bill. Strengthened tenant rights combined the abolition of Section 21 and periodic tenancies make comprehensive coverage essential. In this landscape, Rent Guarantee Warranties are high risk.

What is Rent Protection Insurance?

Rent Protection Insurance is a regulated insurance policy that safeguards you and your landlords against tenant rent arrears and legal or eviction costs. Offered by insurance companies, it requires premiums and adheres to policy terms, providing broader, customisable protection compared to warranties. Here’s why:

Product Structure

The Financial Conduct Authority regulates the sale and administration of Rent Protection Insurance. This means all policyholders get clear policy terms, while hidden clauses and misleading wording aren’t allowed. Having a consistent framework ensures that premiums, excesses, and payout conditions are:

• Explicitly defined
• Fairly applied

Legal recourse

Whereas warranties are more subjective, rent protection policyholders can complain to the Financial Ombudsman Service where eligible. This body independently assesses complaints which relate to rejected or mishandled claims where the complainant remains dissatisfied.

Claims Process

Insurers underwrite rent protection policies. So when you make a claim, you know it’ll be handled in accordance with the policy terms set by the insurer. These insurers have clearly defined terms for what constitutes a valid claim, giving you more certainty when submitting one. 

What’s more, the Financial Services Compensation Scheme (FSCS) provides protection which covers you when financial organisations go out of business. This reduces the risk of you being left without protection.

Cost

All insurance products are subject to Insurance Premium Tax (IPT), and Rent Protection Insurance is no different. This adds 12% to the base premium, making it more expensive than a Rent Guarantee Warranty.

RIsk

As a regulated product with broader coverage, Rent Protection Insurance is the ideal safeguard for agents and landlords preparing for the Renters’ Rights Bill. In other words, it’s a low-risk, high-reward solution.

Conclusion: Goodlord's Rent Protection Insurance

From the comparison above, it’s clear that Rent Protection Insurance provides more comprehensive and reliable coverage than Rent Guarantee Warranties. 

Goodlord’s plan is a testament to that. In the event of a claim, we support letting agents across the UK to put more money back in their landlords' pockets than any other provider. We also insure over £1B in annualised rent.

*Subject to policy terms and conditions. See here for a full breakdown.

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Oh Goodlord Limited is an Appointed Representative of Goodlord Protect Limited which is directly authorised by the Financial Conduct Authority, registration number 836727.