When tenants stop paying their rent, sometimes it’s a wilful and deliberate act but more often it’s because they’re having genuine financial problems.
While around 90% of tenants pay on time and in full, roughly 9% of tenancies are in rental arrears at any one time. Although the likelihood of a tenant falling into serious arrears - to the point where they either leave the property or you have to evict them – is small, it is a possibility and if you’re investing in Buy to Let for the long term, it’s fair to assume you might have a non-paying tenant at some point.
What is Rent Protection and Legal Expenses Insurance?
As with all types of insurance, you may not need to make a claim for several years but having Rent Protection gives you peace of mind that even if your tenant does fall into arrears, your profits will be protected for up to 12 months.
The cover we offer is provided by Aviva, one of the largest insurers in the UK. It includes:
- 100% of the monthly rent for up to 12 months (with a maximum total of £35,000)
- Up to £15,000 of legal expenses to pay for regaining possession of your property from a tenant
- Up to £15,000 if you have to evict squatters who have gained access to your property unlawfully
The cost varies and it's best to get an up to date quote. But if you were looking to cover up to £875 of monthly rent this should be around £24.50 per month.
To note: Rent Protection and Legal Expenses Insurance cannot be added to a Buildings and Contents insurance policy.
The cost of not having Rent Protection and Legal Expenses Insurance
There are two key costs you are likely to incur if your tenant stops paying their rent. Firstly, you lose the rental income, which on average is likely to be £875 per month and secondly you may need to pay to evict the tenant.
If you have to evict your tenant, likely costs are:
- Standard possession order - an online application £325
- Warrant for possession - (baliff's fee) if the tenant doesn't leave by the date stated in the possession order £121
- Accelerated possession orders - you can apply if your tenants have not left by the specified date in your Section 21 and you are not claiming rent arrears £335
From a rental perspective, should your tenant decide to stay even though they aren't paying their rent, the statistics from the Ministry of Justice (Q2, 2019) show it takes an average of between five and six months to evict a private tenant.
Assuming an average rent of £875 per month and the costs incurred to evict a tenant, it could cost up to 10,000 in lost income and eviction fees. With insurance for this level of rent costing around £24.50 per month it really is worth considering protecting your rental income.
You can get a tailored no-obligation quote from one of our insurance advisers by visiting your local Your Move or requesting a call back via our website.