The accidental landlord looks at rental guarantee insurance

Victoria Whitlock gazes into her crystal ball to predict that gut instinct is cheaper - and far less hassle - than insuring against bad payers
As Homes & Property reports, rental demand is soaring in London. But wait! Don't start celebrating yet fellow landlords, because rent arrears are rocketing, too, according to National Debtline. What this tells us is that you'll probably have no difficulty finding your next tenant - but there's a good chance they won't pay up.

In these rocky times it probably makes sense to take out rental guarantee insurance. I say "probably" because I've never bothered with it myself.

It doesn't cost a lot - premiums start at less than £100 for a year and they're tax-deductable - but what puts me off this type of insurance is that you have to jump through quite a few hoops to get it, including delving into your tenants' rental and financial history, and not all renters are eligible for cover.

Typically you'll need a written reference from your tenant's previous landlord and their current employer, which seems sensible, but your tenants will also have to pass a professional credit check. Pah! Might as well do my Gipsy Rose Lee impersonation and whip out my crystal ball than pay for one of those.

What guarantee does a credit check offer that your tenant is a good 'un? No matter how thorough the check, it can't guarantee your tenant won't lose their job, especially in the current climate, and some tenant screening services are so superficial they won't even prove that a tenant has a job in the first place.

I got a call from one screening agency asking me to provide a reference for a previous tenant of mine. The woman didn't ask for any proof that I was the landlord or that the tenant had lived in the property. "A verbal reference is fine," she said, breezily.

Another agency asked me to provide a character reference for a woman, a mum from my kids' school, who I barely know. All it wanted was a one-line email from me to confirm that I had known this person more than five years.

The fact that during that time I had spoken to her only five or six times didn't bother the agent. The woman could be planning to run a crack house for all I knew, but as far as the agent was concerned I had provided the reference she needed to hand over the keys.

I believe your gut instincts will tell you more about a tenant than a "professional" credit check will, but these can't be avoided if you opt for the security that insurance provides.

However, before you buy rental protection insurance (sometimes also referred to as tenant default insurance), make sure it provides sufficient cover. Some policies I've come across offer less protection than a paper umbrella.

I found one that cost £160 for annual cover, yet limited payments to £15,000 and a maximum of six months' rent - and there was an excess of one month's rent. I don't know about you, but I don't think that's a very good deal.

I found a better policy with Just Landlords ( which cost £90 per annum and covered up to £50,000 of rent arrears with no excess, plus 50 per cent of the rent for a further three months if a property had to be repaired before being re-let.

As tenants sometimes trash a place before being forcefully evicted, I suppose this is worth considering.

As most policies will also cover the legal costs of recovering rent arrears and evicting non-paying tenants, I suppose it could be considered a good thing — but I think I'll stick to my crystal ball gazing.

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