How does Rent Guarantee Insurance Work? – (Critical protection against rent default)

(**) Disclosure: This post may contain affiliate links, meaning our company, JCHQ Publishing will get a commission if you decide to make a purchase through the links, but at no additional cost to you.

As a property manager, one of your jobs is to protect the landlord’s rental income. Although you should always do a thorough tenant screening and have a proper procedure to collect rent, sometimes unexpected things happen, (i.e. job loss, disability, sickness, divorce, death) and a tenant cannot pay rent. This is why you should make the landlords aware of the rent guarantee insurance.

Rent guarantee insurance provides protection for landlords in the event that a tenant stops paying rent. In other words, it guarantees that the landlord will still receive some form of payment, even if the tenant falls behind on their rent payments. This is an important policy to have, especially given the current rental market.

If your client is a mega real estate investor with hundreds of properties, having a few units with missing rent payments might not be a big deal. They have enough units to diversify the risk and generate adequate rental income to make up for it.

But, if they’re a small investor with one or two properties, then every penny counts. After all, your client relies on the rent to pay the mortgage, property tax, insurance, maintenance, and repair. Also, if they don’t receive the rent, your property management could be in jeopardy too.

This is why rent guarantee insurance is so important to landlords and property managers – it gives both parties peace of mind knowing that their investment is protected.

Actually, I’m also a landlord myself. Recently, looking into the rent guarantee program because one of my tenants is about to move out. And I would like some protection against rent default.

I reviewed the rent guarantee programs from several insurers and would love to share my findings with you.

Before we start, here’s a brief disclaimer: This post does not intend to provide any insurance advice. Each policy could have different terms and conditions, so the information on this post could be different from your actual coverage. Details could be subjected to change without any notice and are not guaranteed to be error-free. In short, I am not your insurance agent, and you should always consult with one to get the best coverage for your situation. Also, rent guarantee insurance is different from renters insurance, which protects against damage and liability.

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1) What does rent guarantee insurance cover?

Landlord and property manager reviewing rent guarantee insurance

There are a different protection that rent guarantee insurance can offer. Typically speaking, the insurer will reimburse the landlord when there’s a default rent payment.

Insurance companies offer different coverage options to match your budget. For example, Rent Rescue has a rent guarantee program that covers up to 6 months of rent, whereas World Insurance will cover up to 12 months’ or $60,000.

Furthermore, some insurers may cover the cost of eviction, legal fees, property damage and lease break protection. Once again, there should be a cap for each covered condition.

2) How do you qualify for rent guarantee coverage?

Landlord applying for rent guarantee insurance

To minimize the risk of paying out a claim, insurance underwriters need to review the details about the tenants. Most rent guarantee insurance providers I’ve come across would require the following documents from new tenants:

  • Recent pay stubs
  • Employment letter
  • Credit report
  • Signed lease agreement

When reviewing the credit report, they would look into whether there have been bankruptcies or evictions during the last five years.

I checked with an insurer, and they confirmed that the approval process would take them just a couple of business days.

Some insurance companies have a pre-screening service. For example, after my property manager screen the applicants, I will forward the prospective renters’ details to the insurer. If the insurance company doesn’t accept the applicant, it means that the risk of the tenant will default rent payment is relatively higher.

Then I will just decline this particular renter’s application and move on to the next one.
There should be a fee for this pre-screening service. I believe is somewhere around $25 to $35.

Furthermore, most underwriters require the rent-to-income ratio to be less than 45%. After all, if the tenant is using most of their income to pay rent, there’s a higher chance that they would fall behind on their rental payments.

If your managed property already has an existing tenant, most insurers will only require proof that they have made their rent payment fully on time for at least 12 months consecutively. (I guess that’s because the chance a tenant will default their rent payments after a year would be less.)

3) How much does rent guarantee insurance cost?

Property manager calculating rent guarantee insurance

Many different factors can affect the premium – the location of the property, the payout period, and the amount of rent. But a general rule of thumb is that the greater the coverage amount, the higher the premium.

For example, the premium of such a policy from World Insurance is 3.5% of gross annual rent, and it could cover up to 12 months of rent. On the other, the average annual premium of Rent Rescue is $300 per unit for covering up to 6 months of rent.

Sometimes, there could be a discount for the annual payment option versus the monthly.

4) Who is responsible for making a claim?

The landlord would be responsible for making a claim. If they have given consent to you as their property manager, maybe you could handle this on their behalf.

Typically speaking, the insurance company would require the policy number, policyholder contact information, monthly rent amount, number of months rent has been in arrears, and amount of legal expenses incurred (So make sure you keep all the receipts).

The claim department may also need to review:

  • A copy of notices sent to the tenant regarding rent payments
  • A copy of any legal documents relating to eviction proceedings

I’ve come across an insurer who would collect the rent on behalf of the landlord. So when there’s any delinquent payment, they will automatically reimburse the rent to your bank. Then they will try to sort out the missing payment with the tenants without your involvement.

However, many property managers would prefer the rent to be deposited into their trust account first since they need the funding to cover other expenses such as their management fees and repair costs.

If that’s your case, you or the landlord would need to notify the insurance company whenever there’s any delinquent payment.

5) Are there any exclusions or limitations to the policy that you should be aware of?

reviewing rent guarantee insurance policy

Absolutely. Every policy has its limitations and exclusion. Rent guarantee insurance is no exception.

I just talked to an insurance provider. They confirm that claim will not be paid out if the landlord did something against the law or the landlord and tenant act that caused the tenant to not pay (for example, changing the locks to the rental unit.)

I reviewed the sample policy from RentRescue, and below are their exclusion clauses:

C. EXCLUSIONS We will not pay for loss of “rental income” if:

1. During the “period of indemnity”, the “rental unit” is uninhabitable for any reason or if the “rent default” is directly or indirectly due to any one or more of the following:

a. Any direct physical damage to the “rental unit” or the “related property” making it or any part of the “related property” uninhabitable;

b. Your failure or the failure of your “property manager” to comply with the terms of the lease pertaining to the “rental unit”;

c. Any non-compliance with building codes, or with any local, state or federal statutes or regulations relating to the rental or occupancy of the “rental unit” or “related property” including but not limited to any Landlord and Tenant Act or Law;

d. Lack of ingress or egress to the “rental unit” or “related property” due to any cause, including but not limited to flood, earthquake, fire, hurricane, actions of civil authority or road construction;

e. Terrorism;

f. Nuclear, biological, chemical or radioactive contamination from any source;

g. Mold;

h. War, insurrection, riot or civil commotion; or

i. Pollution of any type from any source.

j. Governmental Action including seizure or destruction of property by order of a governmental authority.

2. The rent for the “rental unit” is in arrears at the inception date of this policy term. 

Quote from RentRescue – Rent Default Insurance Policy

The RentRescue FAQ page also states that the policy doesn’t provide liability and property damage coverage. It is strictly for rent default.

Furthermore, you may want to confirm with the insurer whether there’s any requirement on the cause of a rent default? (i.e., job loss? sickness? disability? death?).

I reviewed the World Insurance website.

“We will pay up to 3 months rent directly to the landlord if the qualifying tenant remains unemployed and the landlord and tenant have emailed us a Notice of Pending Default for each month the tenant remains unemployed. Rent is only paid to the landlord.”

Quote from

So does it mean the rent default needs to be strictly due to tenants being unemployed? What if you run into “professional tenants” who are employed, have money, but just not willing to pay?

Those are the questions you should check with the insurer before enrolling in the plan.

6) Can you cancel rent guarantee insurance if you no longer need it or if your circumstances change?

Some insurers require you to commit to the coverage for at least one year. Afterward, they will renew it on a month-to-month basis.

For Rent Rescue, although you can remove a rental unit from the policy in the mid of the term, the policy premium is fully earned, so you won’t be getting any refund.

7) Things to consider before taking out a rent guarantee insurance policy

Things to consider about rent guarantee insurance
  • Ease of a claim
  • Get the right amount of coverage
  • Duration of payout
  • Deduction
  • Premium
  • Terms and conditions -especially the exclusions

Besides the above, I think many people neglect to review the legit of the insurance company. It’s better to confirm whether they are a licensed insurer in your state. You can check with the regulator in your area to confirm. 

Also, take a look at their financial stability rating. After all, you don’t want to have an insurance policy with a company unable to fulfill its coverage obligation.

In many instances, the company that you purchased the policy from might not be the only one who backs up the claim. 

For example, World Insurance partners with Pensio in providing the rent guarantee insurance, while RentRescue works together with North American Risk Services (NARS).

Keep in mind that some carriers are “non-admitted.” So they are not state regulated or do not contribute to the state guaranty fund. In other words, it is possible that they are not as well capitalized. And if they become insolvent, you won’t have the protection from the state’s guaranty fund.

8) Where can you get the rent guarantee insurance?

Property manager looking for rent guarantee insurance

I did extensive research online, but there are not a lot of insurance companies offering rent guarantee insurance. Besides World Insurance and Rent Rescue, mentioned earlier, there is also the Steady. 

Steady has a Rent Advance program that is different from the other rent guarantee insurance. Rather than paying out when there’s a default payment, it claims that it can provide owners with up to 12 months of rent upfront! However, they only work through property managers partnered with Steady. So I’m unable to get too much info from them at this point. 

Furthermore, there is another insurer called SingleKey. Their coverage is quite comprehensive, which includes 12 months of rent payments (up to $60,000), lease break protection, and eviction cost. But their office is located in Canada, so not sure if they can offer coverage in the State. Anyhow, it’s still a good reference to know what is being offered around the world. 

9) Does it worth it to obtain rent guarantee insurance?

Whether rent guarantee insurance is worth it depends on the covered conditions, cost, and the risk appetite of the landlords.

If the tenant will 100% default on rent payments (although I’m unsure why someone will rent the unit to such a candidate) of course, it is worth getting the insurance.

On the contrary, if the tenant will absolutely pay the rent, then of course, you might think that paying the premium is a waste of money. 

As much as we want to fully rely on the tenant screening process (and I think it still works to a certain extent), there are just too many things in life beyond our control. 

Since we can never be 100% sure whether the tenant will default on the rent payment, the rent guarantee insurance might give some peace of mind to know that there’s a protection in place to cover any unpaid rent.

According to the TransUnion SmartMove user survey, 84% of respondents viewed “Payment Problems” as one of their top concerns, and the average cost of eviction was $3,500.

However, that survey was done back in 2014. I highly doubt the cost would be a lot higher these days. Not just due to inflation, but in some states, the time to evict a tenant could be a lot longer.

Thus, the eviction process can take from five weeks to three months, assuming there are no delays. If there are delays, the process can take as much as a year.

Quote from – How long does the eviction process take

Imagine if it really takes you a year to evict a tenant. Can you really afford all the different expenses (mortgage, property tax, repair, insurance) for that long? I personally wouldn’t want to take that risk. That’s why I’m also looking into rent guarantee insurance.

I also posted this question on a property manager group through social media. There are mixed responses among property managers about whether it is worth getting the coverage. Nevertheless, if that is a top concern among so many landlords, I believe there should be a discussion on mitigating the risk.

Of course, all these are just my two cents, and you should always consult with your insurance agent to see if it’s worth it in your situation.

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Disclaimer: The information in this post is for general information only, and not intend to provide any advice. They are subjected to change without any notice, and not guaranteed to be error-free. Some of the posts on this site may contain views and opinions from individual not related to JCHQ Publishing. They do not necessarily reflect our view or position.


  • World Insurance – Rent Guarantee Insurance (source)
  • RentResue – Rent Default Insurance (source)
  • Investopedia – Rent Guarantee Insurance (source)
  • Steady – Rent Advance (source)
  • TransUnion MySmartMove – The True Cost of an Eviction (source)
  • SingleKey (source)


  • Jacob Coleman

    Jacob is a content writer and a real estate investor. He has experience working with different real estate professionals throughout the years. (i.e., appraisers, real estate agents, property managers, home inspectors.) In order to build a career you love, Jacob believes not only you need a thorough understanding about the profession, but you also have to find out what type of jobs could match your personality, lifestyle and expectation.

Jacob Coleman

Jacob is a content writer and a real estate investor. He has experience working with different real estate professionals throughout the years. (i.e., appraisers, real estate agents, property managers, home inspectors.) In order to build a career you love, Jacob believes not only you need a thorough understanding about the profession, but you also have to find out what type of jobs could match your personality, lifestyle and expectation.

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