Rent Guarantee Insurance Calculator
Work out the break-even claim probability for rent guarantee insurance: how likely a loss must be before the premium pays for itself.
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Rent guarantee insurance pays the rent if a tenant stops paying, usually for a capped number of months and after an excess period. Whether it is worth the premium depends on one number nobody quotes: how likely a claim actually is.
The useful output is the break-even probability. If you think the chance of a claim in a year is higher than that figure, the premium is good value on expectation. If lower, you are paying for peace of mind rather than expected return — which can still be the right decision when a loss would be unaffordable.
The calculation
Maximum payout = (months covered − excess months) × monthly rent. Break-even probability = annual premium ÷ maximum payout. Above that probability the expected payout exceeds the premium; below it, you are buying certainty rather than value.
Worked example
A 1,500 rent with 12 months of cover and a one-month excess pays at most 16,500. A 350 annual premium is 2.12% of that, so the policy breaks even if there is a better than one-in-forty-seven chance of a full claim in any year. The premium is 1.94% of annual rent, or about 29 a month.
When to buy it regardless
Expected value is the wrong test when a loss would be catastrophic. A landlord with one property and a mortgage that depends on the rent should insure even at a poor expected return, because the downside is losing the property. A landlord with ten properties can self-insure and keep the premiums.
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Create your free property pageFrequently asked questions
How likely is a tenant to stop paying?
Across the market, serious arrears affect a low single-digit percentage of tenancies a year, and thorough referencing reduces it further. Your own risk depends on tenant quality and the local market far more than on any published average.
What do these policies usually exclude?
Commonly tenants not properly referenced, arrears that began before cover started, tenancies without a written agreement, and periods beyond the cap. Insurers frequently require their own referencing standard, so read the conditions before relying on cover.
Should a landlord with several properties buy it?
Often not. Spread across a portfolio, arrears become a manageable cost rather than a crisis, so retaining the premiums usually beats insuring. The case is strongest for a single property where the rent covers a mortgage.
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