Landlord’s Complete Guide: Rent Guarantee vs. Loss of Rent Insurance
- RebuildCostASSESSMENT.com
- 8h
- 6 min read
Eviction is becoming slower and more costly. With Section 21 ending under the Renters’ Rights Bill, landlords now face longer court delays and higher legal fees when a tenant stops paying rent. Protecting rental income is more important than ever.
Three types of cover support this:
Rent Guarantee Insurance – protects you when a tenant does not pay
Landlord Legal Expenses Insurance – covers the legal cost of eviction
Loss of Rent Insurance – replaces income when the property cannot be lived in after insured damage
RebuildCostASSESSMENT.com is a RICS-regulated firm and offers expert guidance on a major risk many landlords miss: underinsurance. If your building is insured for too little, your Loss of Rent payout may drop by the same amount. We help ensure your valuation is correct so your cover performs as it should.
Rent Guarantee Insurance (RGI) explained
Rent Guarantee Insurance (also called rent protection insurance or tenant default insurance) protects you when a tenant stops paying rent but still lives in the property. It replaces the income you lose during this period and helps you keep cash flow steady while you work through the legal process to regain possession.
RGI usually covers:
Unpaid rent after a tenant defaults
Monthly payments for up to 12 months
Income support until you gain vacant possession
Help with mortgage and other ongoing costs
This type of cover deals only with tenant-related risk. It does not apply if the property is damaged, empty, or unsafe to live in.
For landlords facing tight budgets and longer eviction times, a strong rent protection insurance policy acts as a simple safety net. It gives you a steady income even when a tenant does not meet their obligations. This support helps you manage mortgage payments, repairs, and other costs without extra stress.
If reliable monthly income matters to you, Rent Guarantee Insurance is one of the clearest ways to protect your rental revenue from tenant default.
Landlord Legal Expenses Cover and The Renters’ Rights Bill
Landlord Legal Expenses Insurance (LEI) covers the legal costs that arise during disputes with tenants. It can pay for solicitor fees, the cost of serving notices, court representation, and access to legal advice at any time. This support is valuable when cases take months to resolve.
The need for this cover is growing. The Renters’ Rights Bill will remove Section 21, so all evictions will use the Section 8 route. Government guidance from November 2025 also confirms that the rent arrears threshold for eviction will rise from two months to three months. This means landlords must wait longer before they can act, which increases both stress and the amount of unpaid rent.
You can read more about these changes in our insight on the impact of the Renters’ Rights Act on landlords.
With these new rules, landlord legal expenses insurance is no longer optional if you’re looking for true income protection. It helps manage the cost and complexity of gaining possession. For landlords worried about longer timelines and strict legal steps, LEI provides steady support through each stage of the process.
The crucial difference: Rent guarantee vs. loss of rent
It is important to understand the difference between Rent Guarantee Insurance and Loss of Rent Insurance, as each one protects a different risk. These policies solve separate problems and should not be treated as the same type of cover.
Rent Guarantee Insurance (RGI) protects you from tenant risk. It covers unpaid rent when a tenant defaults but still lives in the property. The aim is simple: to keep your income steady during what can be a long eviction process.
Loss of Rent Insurance (LoR) protects you from property risk. It replaces lost income when an insured event – such as a fire, flood, or major damage – makes the home unsafe to live in. In these cases, the tenant must leave, and the loss is linked to the building itself.
These payouts depend on the difference between sum insured and rebuild cost, as this affects how well a loss of rent policy can perform. A clear rebuild valuation helps avoid shortfalls in a claim.
Comprehensive landlord loss of rent cover helps protect income during long repair periods.
The core difference is simple: Rent Guarantee Insurance helps when the tenant will not pay. Loss of Rent Insurance helps when the property cannot be lived in. Knowing this distinction makes it easier to see where major risks — and hidden gaps — can appear.
Landlords who want to learn more about rebuild values can read our guide on rebuild cost considerations for landlords.
The underinsurance risk in loss of rent
Loss of Rent Insurance works as it should only when the building’s sum insured is correct. If the property is underinsured, the insurer can use the average clause to reduce the payout. This means the claim is cut in line with the level of underinsurance. For example, if a property is insured for 60% of its true rebuild cost, the landlord may receive only 60% of their loss of rent policy entitlement.
This issue is one of the most common reasons landlords receive less than expected during a claim. Many only learn about it after a major loss. You can read more in our guide on what underinsurance means for landlords.
RebuildCostASSESSMENT.com helps prevent this risk. As a RICS-regulated provider, we offer accurate reinstatement valuations through two services: fast Desktop Assessments for most homes and full on-site assessments for properties that need a physical inspection. Both options help ensure your Sum Insured is correct, protecting your building and the rental income you rely on under a Loss of Rent policy.
You can also view the latest underinsurance statistics to see how common this problem is across the UK.
Essential policy eligibility and pitfalls
Many rent guarantee claims fail because key steps were missed at the start of the tenancy or during the first signs of arrears. Knowing these rules is vital if you want to avoid disputes and protect up to 12 months of rental income.
To keep your claim valid, you must follow these points:
1. Tenant Referencing
Complete full and clear referencing before the tenancy begins.
This should include credit checks, income checks, and a review of the tenant’s rental history.
Any missing information can lead to a rejected claim.
2. Timely Reporting
Tell your insurer about arrears as soon as the tenant falls behind, usually at 30 days.
You must submit the claim before the 90-day limit, or it may not be accepted.
3. Legal Compliance
Serve the correct Section 8 notice as soon as you need to act.
Make sure each legal step is followed in the right order.
Mistakes in notices or documents are a common reason for declined claims.
Following these rules is essential. Even a small error can put your entire rent guarantee claim at risk.
Why income protection is incomplete without an accurate rebuild cost assessment
Protecting rental income means covering both types of risk. Rent Guarantee Insurance and legal expenses cover protect you from tenant issues. Loss of Rent Insurance protects you from property damage that makes the home unsafe to live in. But these policies can only work as expected when the building’s sum insured is correct. If the valuation is wrong, a Loss of Rent payout may not meet your needs.
The best way to safeguard your investment is to make sure your buildings insurance is accurate. To learn more about how valuations are carried out, read our guide on how rebuild cost assessments work.
Other helpful resources
Important disclaimer: The information provided here is for general informational purposes only and is not intended as professional advice. While we strive to ensure all information is accurate and up-to-date, the content may not reflect the most current legal or regulatory developments, standards, or practices. No representations or warranties are made (express or implied) about the accuracy of the information provided, and reliance on this information is strictly at your own risk.
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