When it comes to Rent Protection Insurance, there are headline benefits which make a policy stand out - and understanding the policy wording can help you filter through the noise, and decipher exactly what you'll get, as Oli Sherlock, Goodlord's Director of Insurance, explains.
Whether you know it as rent guarantee insurance or rent protection insurance, its purpose is normally the same: to protect your landlord's investment and help you protect your agency's bottom line. Here's a guide of what you should look out for in the policy wording when choosing the best product for you and your landlord.
Contents:
- Rent Protection payments
- Excess
- Payments after vacant possession
- Legal expenses
- Property damage legal expenses
- Claim window
- Claim process
- Eviction of squatters
- Mediation
- Pricing
- Policy transfers
Rent Protection payments
Let's start with the basics - the length of cover and why that's important. New lettings legislation was introduced during the pandemic in support of tenants, including an extension of notice periods to six months and an eviction ban lasting until 31 May in England or 30 June 2021 in Wales. This protection for tenants has obviously had a knock on effect for the courts, which have found themselves facing more cases than ever before, further delaying the whole process.
For landlords, this means that the length of time it takes to get a tenant out of a property is increasing. If you offer your landlords Rent Protection as part of your fully managed service, that's great news for them - and for you - as long as you choose the right length of cover.
You need to ask yourself if your provider's policy will cover you for the full length of the eviction process. For example, six month's cover would only protect you until the point that the current notice period expires, not the full evictions process. A policy that pays out for 12 or, even better, 15 months' rent can help give that peace of mind.
Excess
A rent protection policy's excess is often equal to one or two month's rent. Even if your landlord's payments kick in after this point, the rent during that excess period would still be gone forever, and you may see that affect your management fee. If you choose a policy with nil excess, your landlord should receive 100% of the rent owed, so there's no disruption to their income.
Payments after vacant possession
The terms of the policy after vacant possession can vary, such as the percentage of rent covered and how long for. You should also check when your landlord will get these payments - once your landlords' property is being remarketed or from the point of vacant possession, so you know your landlord won't see any interruption in payment. If such a payment is only made at the point the property is back on the market, this will obviously reduce the amount your landlord could benefit from.
You should also look at your average void period. Across England, void periods currently stand at 21 days. Assuming your agency is seeing a similar average, a policy covering up to two months after vacant possession is more than enough to ensure your landlord gets at least part of their income while you look to re-let the property.
Legal expenses
When looking at legal expenses, you need to check how much is covered and understand what actions would be taken under its umbrella, such as serving Section 8, deploying a bailiff and so on. Each step in the process would normally incur a fee - which may be covered under the legal expenses section of the policy. You should also check how much cover you'll need in the worst case scenario, to make sure you're not paying extra for cover which isn't strictly required. It may also be worth checking whether the legal expenses provide support for any breach of the agreement or just rent arrears. If only the latter, your landlord could be left exposed.
Property damage legal expenses
Not all providers will include this in their policy as standard, but knowing that your landlord has support to cover the legal costs in cases of excessive damage by the tenant can be another string to your letting agency's bow, bolstering your relationship management and improving landlord sentiment.
Claim window
For every policy, there's a set time period where you can make a claim once your tenant has missed a rent payment. Where a policy can stand out is if it will still provide support even if you miss that claim window. Some policies will provide eviction services, regardless of whether you met the claims window time frame, for example.
Claim process
The most crucial part of any insurance policy. Actually putting in a claim can be time consuming, and the right provider can take that extra admin off your hands. Can the provider use information it already holds on the property to make the claim, or do you have to do the leg work for it, pulling in paperwork from different places? You should factor the level of support that the provider can give you into your decision. Understanding the process thoroughly is key to setting the right expectations with your landlords.
Eviction of squatters
Rent protection offers support when a tenant stops paying but what about other serious breaches of the tenancy contract? Subletting, illegal activities - these can strain your relationship with your landlord, at a time when they're looking to you for extra support. With this included in a policy, you can avoid using a local solicitor (and the fees the landlord would have to pay them) and ensure a smoother process with one provider that already understands the details of your case.
Mediation
The government's guidance highlights that working with tenants to understand their circumstances is more important than ever, as is showing understanding as to why they may not be paying their rent. You should consider if your Rent Protection provider is communicating with tenants on our behalf, to try to encourage them to pay.
The government does in fact now offer its own free mediation process - but only late in the process when the case is reviewed. A mediation service included in your policy could find a resolution for everyone at the early stages of a claim, and help everyone avoid wasting time.
Pricing
Insurance Premium Tax (IPT) sounds like the VAT of the insurance world, but with a key difference - you can't claim it back. Choosing a policy where IPT is included in the price avoids any ambiguity; the price you see is the price you pay. Make sure that you factor in the extra 12% when setting your management fees based on the price of your rent protection policy, if IPT isn't included.
You may also see that you can pay a percentage or a standalone yearly rate for your insurance - both options have their merits, but a set price for a policy will be easier to build into your revenue forecasts through your management fee.
Policy transfers
If you're looking to switch your rent protection provider, you should hunt around for providers who can take on both new and existing business. Once you find those providers, there will likely be a no claims period imposed - again, another point to check in the policy wording - but you should look into how easy the transfer process will be for you. In some cases, you'll be able to save money while providing your landlords with improved benefits - a great way to improve your margins while adding value to your service to landlords.
If you're interested in learning more about Goodlord's Rent Protection Insurance, get in touch. Terms and conditions apply and, as the article suggests, you should always read the policy wording.
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