Rental Insurance - is it worth it?

Apologies in advance - there's a sales pitch in this blog! However it's a sales pitch that has a benefit for the landlord.

A landlord can purchase Rent & Legal Insurance for his property. There are a number of different providers in this area, offering very different policies. The more basic policies are usually given away by lettings agents as a freebie at the start of tenancies - they offer some cover, usually with a number of restrictions, if the tenant doesn't pay the rent. As such the landlord may be able to recover some of the money he loses. 

Other policies are chargeable to the landlord. The Belvoir Rent & Legal Cover is one such. Because it's chargeable, some landlords don't take it, although to be fair the majority do. But what do you get for your £126.00 per annum? Let's look at the case of 2 landlords with problem tenants:

Mrs Singh

• Mrs Singh did not have Belvoir Rent & Legal Cover.
• Tenants lost job and lost their ability to pay rent. They applies to the Local Authority to be housed, but were told this was not possible until they were homeless and their landlord had a court order making them vacate their property. As such the tenant did not leave the property.
• Mrs Singh had to apply to court for possession of her property, again for an eviction order, and again for the bailiff to visit. She could not attend court herself, so had to pay for a solicitor on each occasion - total cost including court fees £1050.00.
• Whilst the court process was ongoing, Mrs Singh received no rent from the tenant. This represented a total loss of £2400.00.
• When the property was reclaimed, Mrs Singh had to pay for a lock change, some clearing and clearance, and it was a month before another tenant was found. Total cost to Mrs Singh of £840.00.

Total cost to landlord £5,250.00

Mr Cornish

• Mr Cornish did have Belvoir Rent & Legal Cover.
• His tenant didn't pay rent, vacated the property, and he ended up with third parties living there who would not leave.
• It took 5 months to end the tenancy, via a court application, an eviction order, and a bailiff visit. No rent was paid in this period. 
• Mr Cornish DID have to manage his own cash flow on a short term basis. However when the property was finally reclaimed, Mr Cornish received £5460.00 from the insurer covering ALL his rent, ALL his legal fees, and ALL his court costs. 

Total cost to landlord £326.00 

(£126.00 insurance premium, £80.00 lock change, £120.00 cleaning) .

It should be noted that very few tenancies fail, and those that do can usually be resolved amicably between landlord and tenant. However if you do end up with a rogue tenant, the law is heavily stacked in the tenants favour - this is when the insurance cover becomes worthwhile as although it cannot remove the frustration, it does remove the financial worry.

Richard.