Rent protection insurance is a small annual cost against an infrequent but heavy loss, which is the shape insurance is for. Whether it is worth it depends on two things a landlord can actually work out: how long it would take to recover possession and stop the loss, and whether the portfolio is large enough to carry that loss itself. Both are arithmetic rather than opinion.
What the loss actually is when a tenant stops paying
Not one month. A tenant who stops paying is usually still there several months later, because notice periods, court listing times and enforcement all take time, and the arrears accumulate throughout. Add the legal costs of the possession action and the cost of putting the property back into a lettable state. The realistic figure for a single bad tenancy is several months of rent plus fees.
The arithmetic for a single property landlord
Compare the annual premium against that realistic loss and against the probability of it happening. Even at a low probability, a landlord who could not absorb several months of no rent while still paying a mortgage is buying certainty rather than expected value, which is a sound reason to insure. The legal expenses half is often worth the premium on its own.
The arithmetic for a portfolio
With enough properties, arrears become a predictable running cost rather than a shock, and paying a premium on every property to insure a loss you can absorb is usually more expensive than carrying it. The crossover is somewhere in the low tens of properties for most landlords, and the decision can be revisited each year rather than settled once.
What improves the odds regardless
Proper referencing, a guarantor where the referencing is marginal, a deposit protected correctly, compliance documents served on time, and arrears chased from the first missed payment rather than the third. Those are also the conditions of the policy, which is not a coincidence: insurers require them because they are what makes the loss less likely.
Questions people ask about rent protection insurance
How much does rent protection insurance cost?
It is normally quoted as a modest annual amount per property or as a percentage of the annual rent, and it varies with the cover period and whether legal expenses are included.
Is it worth it for one property?
Usually, if several months without rent while still paying a mortgage would be a serious problem. The legal expenses half often justifies it alone.
When is self insuring better?
Once the portfolio is large enough that arrears are a predictable running cost rather than a shock, paying a premium on every property to cover a loss you can absorb is generally more expensive.
Does buying it mean I can reference less carefully?
The opposite. Referencing to the insurer's standard is a condition of the cover, so the policy requires the discipline rather than replacing it.