Most landlords who have rent guarantee cover have never read the policy. That is not a criticism. Until a few weeks ago, neither had I, not properly, and it is my job.
What follows is an account of what I found when I sat down and read ours line by line, why it made me change provider, and the three questions I think every landlord should put to whoever manages their property.
First, the bit nobody explains
There are two completely different things sold under the name rent guarantee, and the difference decides whether you ever see a penny.
In one version, you are the insured party. The policy is in your name, you are the customer, and if a tenant stops paying, you claim.
In the other, the agent is the insured party. The policy is in the agent’s name. You are not a party to it at all and cannot claim under it directly. The agent claims, and passes the money on to you. Most agent-arranged rent guarantee works this way, including ours.
That second structure is perfectly normal and there is nothing wrong with it. But it has a consequence that almost nobody spells out to landlords: if something goes wrong with the agent’s ability to claim, your rent protection quietly stops existing, and you will not find out until the month a tenant stops paying.
What I found in our wording
Our policy was an agent policy. Buried in the exclusions was this:
“Any claim where you are unable to provide written evidence of your financial interest in the rent… For example, where you are unable to provide us with a copy of a contract between you and the landlord… in which you agree to pay the full amount of rent… in the event of non-payment by the tenant. No claim will be valid under this insured incident where you are unable to evidence your contractual liability for the full amount claimed.”
In plain English: the insurer would only pay us if our management agreement said we were personally liable to pay the landlord the rent whether or not the tenant paid.
Our management agreement said the opposite. Like most agency agreements in the country, it stated that we are not liable for non-payment of rent. That is a standard clause and it exists for good reason, because an agent is not a guarantor.
So the policy required one thing and the contract said another. On my reading of it, I could not be confident a claim would have been paid. We had never made one, so this was never tested, and I am not going to tell you it definitely would have failed. But I was not prepared to leave landlords relying on cover I was not confident about.
There was a catch in the obvious fix. To make that clause work we would have had to promise landlords we would pay the rent ourselves, whatever happened. Then every claim the insurer turned down would come out of our own pocket. Send one letter two days late and we are paying someone else’s rent on a property we do not own. That is promising more than the policy actually covers, so we looked elsewhere.
Why this happens
It is not that anybody set out to sell something that does not work. It is that the two documents are written by different people for different purposes and nobody reads them side by side.
The insurance is sold under the name of a company you already deal with and trust. The policy is administered by a third company whose name does not appear until you open the booklet. The agency agreement comes from a template that predates the policy. Each document is fine on its own. The gap is in the join, and the join is nobody’s job.
I bought that cover because of the brand on the front of it. That was the mistake, and it is worth naming plainly, because it is the same mistake I would have made again with something else. When I finally looked up the company that actually administers the policy, what I found did not reassure me either. That was a two minute check I should have done before buying rather than weeks after.
What we did
We are moving to a different rent protection product, arranged through a specialist lettings broker and underwritten by one of the large UK insurers. Three things decided it.
The structure works. Their wording accepts a managing agent as the insured because the agent collects the rent, without requiring the agent to guarantee it. The contradiction that worried me cannot arise.
Claims are handled in house. Not passed to a third-party administrator. When you ask who actually decides your claim, you want a short answer.
They told us inconvenient things. When I asked whether policies renew automatically, they said no, and explained that a tenant who has paid more than 31 days late in the previous year has to be re-referenced before cover can continue. Neither of those helps them sell. A broker who volunteers the awkward answer before you buy is usually the one who gives you a straight answer when you claim.
We have also rewritten our own management agreement so that what it says about rent protection matches what the policy actually does. That sounds obvious. It was not being done before.
To be clear about what a landlord actually gets from us: it is a guarantee from Lova, not an insurance policy. We are not an insurer and we are not authorised to sell insurance. The cover sitting behind that guarantee is our contract, not yours, and there is no separate charge for any of it. It is part of the management service.
Three questions to ask your agent
Whether or not you use us, these are worth asking whoever manages your property. They take two minutes and the answers tell you a lot.
1. Who is the insured party on the rent guarantee, me or you?
Either answer is acceptable. No answer, or a vague one, is not.
2. If you are the insured party, does your agency agreement satisfy the insurer’s requirement for financial interest?
This is the question that started all of this. If the agent does not know what you are asking, that is your answer.
3. Who underwrites it, and who handles a claim day to day?
The name selling it and the company deciding your claim are often two different businesses. Ask for both, then look the claims handler up and read what their customers say about how claims went.
The honest summary
We had cover in place that I was not confident would respond. Nobody has been let down by it, because we found the problem before a claim rather than during one. We are changing provider, we have rewritten our management agreement, and we are being clearer with landlords about what the protection is and is not.
I could have said nothing. Publishing it seemed more useful, partly because other agents will have exactly the same gap and will not know, and partly because when you are choosing who looks after a property worth more than most people’s life savings, the thing you actually want to know is whether the person handling it reads the documents.
If you own a rental property in Coventry (or anywhere else in the country), you may want to ask your agent those three questions this week. You are not being difficult. You are asking the person you pay to protect your income to show you how that protection actually works, and I am sure any agent worth having will be pleased you asked.
This article describes our own experience and the wording of our own policy. It is general information rather than advice, and it is not a comment on any particular provider’s products, which vary and change over time. We are not authorised to advise on insurance. If you are unsure about your own cover, ask your agent or broker for the policy wording, and take it up with them or with a regulated adviser.
