Guarantor or Rent Guarantee Insurance? Pros, Cons and Costs for Landlords

The choice between a guarantor vs rent guarantee insurance is one of the most practical risk decisions an England landlord makes before handing over the keys. Both protect you against the same nightmare, a tenant who stops paying rent, but they work in completely different ways, cost very different amounts, and fail in different situations. Since the Renters’ Rights Act 2025 came into force on 1 May 2026, that decision matters more than ever: Section 21 “no-fault” eviction is gone, every assured tenancy is now periodic, and recovering possession for arrears means using a Section 8 ground that can take months. The financial buffer you build at the start of a tenancy is no longer a nice-to-have.

This guide explains exactly what each option is, what it costs, where each one breaks down, and how to decide. We will work through a real numbers example and answer the questions landlords ask most.

Guarantor vs rent guarantee insurance: the core difference

A guarantor is a person (occasionally a company) who signs a separate deed of guarantee promising to cover the tenant’s obligations, typically unpaid rent and damage beyond the deposit, if the tenant defaults. It is a contractual promise backed by that individual’s own income and assets. You are relying on one named person’s ability and willingness to pay.

Rent guarantee insurance (RGI) is a policy you (or sometimes the tenant) buy from an insurer. If the tenant falls into arrears, the insurer pays you the rent up to a monthly cap and for a maximum number of months, and the better policies also fund the legal costs of obtaining possession. You are relying on a regulated insurer with deep pockets, but only if the tenant passed the referencing the insurer required at the outset.

The distinction that trips landlords up: a guarantor is a person who owes you money; RGI is a product that pays you money. With a guarantor, if they refuse to pay you must sue them. With RGI, you claim, but the insurer can decline if conditions were not met.

How a guarantor protects you (and where it fails)

A guarantor’s value is only as strong as the deed of guarantee behind it and the financial substance of the person signing. A well-drafted deed should be a deed (signed, witnessed, and expressed to be a deed), make the guarantor liable for rent arrears, damage and reasonable costs, and, critically since 1 May 2026, make clear the guarantee continues for the life of the now-periodic tenancy rather than expiring at the end of an old fixed term. Many pre-RRA guarantee templates referenced a fixed term that no longer exists; using one of those risks the guarantor arguing their liability lapsed.

Where guarantors fail:

• The guarantor has no real means. A parent on a modest pension who guarantees a GBP 1,500-a-month London flat may simply not be able to pay if things go wrong.
• They refuse and you have to litigate. A guarantee is only worth what you can enforce. Suing a reluctant guarantor for a money judgment, then enforcing it, takes time and money.
• The deed is defective. Wrong names, no witness, no clear statement of continuing periodic liability, or a cap that runs out can all weaken or void the promise.
• Joint tenancies muddy liability. If only one tenant has a guarantor, recovery can be messy where the arrears are jointly owed.

The big advantage is cost: a guarantor usually costs the landlord nothing upfront and, in principle, their liability is not capped at a fixed number of months the way an insurance payout is. For a thorough breakdown of who should provide one and how the deed should read, see our guides on what a tenancy guarantor is and whether you need a guarantor.

How rent guarantee insurance protects you (and where it fails)

RGI turns an unpredictable risk into a fixed annual cost. A typical policy pays the monthly rent once arrears reach a trigger (often one or two months), continues until you obtain vacant possession or hit the policy’s month cap (commonly 6, 12 or 15 months), and reimburses defined legal costs up to a ceiling (frequently GBP 50,000-100,000 of cover).

The catch is in the conditions. RGI almost always requires the tenant to have passed referencing to the insurer’s standard at the start, affordability, employment, credit and sometimes a guarantor of their own. If you let to a tenant who would not have referenced cleanly, the policy may not have been validly issued, and a claim can be refused. Policies also impose strict claim procedures: you must usually serve the correct notice promptly and start possession proceedings within set timescales. Miss a step and the insurer can decline.

Where RGI fails:

• Tenant didn’t meet referencing criteria, so cover never validly attached.
• You didn’t follow the claims process, late notice, no proceedings issued in time.
• The month cap runs out before you regain possession; post-RRA possession timelines can be long.
• Excess and exclusions reduce what you actually recover.

The strength of RGI is certainty and the funding of legal costs, which matters enormously now that the only route to possession for arrears is a Section 8 ground. Understand that route before you rely on it: see how Section 8 possession works.

The RRA 2025 context: why the buffer matters more in 2026

Under the Renters’ Rights Act 2025, in force since 1 May 2026, Section 21 is abolished and there are no fixed-term assured tenancies. To regain possession for rent arrears you must rely on Section 8. The mandatory arrears ground (Ground 8) now requires at least three months’ (or 13 weeks’) arrears at both the date of the notice and the hearing, up from the old two months, and the notice period for that ground is longer than it used to be. In practice that means a longer period of unpaid rent before you can even get to court, and a court backlog on top.

That single change reshapes the guarantor vs rent guarantee insurance decision. A longer arrears window before possession means a bigger potential loss, so the legal-cost funding and multi-month payout of good RGI become more valuable, while a guarantor with genuine means still gives you a person to recover the eventual shortfall from. Always serve possession notices on the current prescribed form on GOV.UK; the form is periodically updated and an out-of-date notice can be fatal to a claim, and may also breach an RGI policy’s conditions.

Worked example: a GBP 1,400-a-month let goes wrong

Assume a single tenant renting at GBP 1,400 per month, holding a five-week deposit of GBP 1,615 (the deposit cap is five weeks’ rent where annual rent is under GBP 50,000). The tenant loses their job and stops paying. You act promptly, but between reaching three months’ arrears, serving notice on the current prescribed Section 8 form, and obtaining a possession order, eight months pass before the property is back in your hands. Total rent lost: 8 x GBP 1,400 = GBP 11,200, plus around GBP 1,500 in court and enforcement costs. The deposit offsets some of it but is designed for damage too.

Outcome with a solid guarantor: You pursue the guarantor for the GBP 11,200 plus costs. If they have genuine means and the deed is watertight (including continuing periodic liability), you can recover most of it, but you may have to obtain and enforce a judgment, which takes further time and money. Net upfront cost to you over the tenancy: nil; recovery effort: high.

Outcome with rent guarantee insurance (12-month policy, GBP 180/year): Once arrears hit the trigger, the insurer pays GBP 1,400 a month up to the cap, and funds the legal costs of the Section 8 claim, provided you served the correct notice and issued proceedings on time. You recover the bulk of the GBP 11,200 plus most legal costs, without suing anyone. Net cost: the GBP 180 premium and any policy excess; recovery effort: low.

Outcome with both: RGI absorbs the rent and legal costs during the claim; the guarantee remains as a backstop for anything the policy excludes or for damage beyond the deposit. This belt-and-braces approach is common for higher-value lets.

When to choose which

• Choose a guarantor when the tenant is otherwise a good prospect but cannot pass affordability or has thin credit (students, first jobbers, the self-employed with lumpy income), and a parent or relative with real means is willing to sign a proper deed.
• Choose RGI when you want predictable, low-effort protection, the tenant references cleanly, and you value having legal costs funded, especially given longer post-RRA possession timelines.
• Choose both for higher-rent properties, or where you want the certainty of insurance plus a person to recover any uninsured shortfall from.

A word on cost recovery: do not try to recoup an RGI premium by adding it as a tenant charge, the Tenant Fees Act 2019 bans most fees, and dressing up insurance as a permitted payment is risky. If you want the tenant to bear the cost, factor it into the rent transparently rather than billing it separately. For a head-to-head on personal guarantors versus paid guarantor companies, see guarantor services vs a personal guarantor, and make sure any deed you use is current via our RRA-compliant guarantor agreement template.

Don’t skip referencing either way

Neither option replaces proper checks. RGI is conditional on referencing, and a guarantor is only meaningful if you have verified their income and assets, not just the tenant’s. Reference the guarantor as you would a tenant: income evidence, credit check and identity. Good referencing also reduces the chance you ever need to claim. Our tenant referencing guide covers the order of checks. And remember that getting other compliance wrong, unprotected deposits, missing certificates, no licence, can expose you to a rent repayment order, which no guarantor or insurer will cover.

Frequently asked questions

Can I require both a guarantor and rent guarantee insurance?

Yes. There is nothing unlawful about asking for a guarantor and also taking out RGI yourself. Many landlords do this for higher-value lets: the insurer funds rent and legal costs during a claim, while the guarantee backs up any shortfall the policy excludes, such as damage beyond the deposit. Just be careful not to pass the insurance cost to the tenant as a separate fee, which the Tenant Fees Act 2019 prohibits.

Is a guarantor cheaper than rent guarantee insurance?

Upfront, almost always, a personal guarantor usually costs the landlord nothing, whereas RGI runs to roughly GBP 80-300 a year. But “cheaper” assumes the guarantor actually pays. If you have to sue and enforce a judgment, the time, stress and irrecoverable cost can dwarf an insurance premium. RGI buys certainty and funded legal costs; a guarantor buys a potentially larger, but harder-to-collect, pot.

Does rent guarantee insurance still work now that Section 21 is abolished?

Yes, RGI remains available and arguably more useful after the Renters’ Rights Act 2025, because possession for arrears now relies solely on Section 8 and tends to take longer. Good policies fund the legal costs of a Section 8 claim and pay rent for several months. Read the policy’s month cap and claim conditions carefully, and always serve notices on the current prescribed form on GOV.UK to avoid invalidating both the claim and the policy.

Will a guarantee from a pre-RRA template still be valid in 2026?

It depends on the wording. Many older deeds tied the guarantor’s liability to a fixed term, which no longer exists for assured tenancies. If the deed does not clearly state that the guarantee continues for the duration of the periodic tenancy, a guarantor could argue their liability ended. Use a deed drafted for the post-RRA periodic model, properly signed and witnessed.

Can I charge the tenant for the cost of a guarantor check or RGI?

You may charge reasonable, evidenced costs of referencing only within the narrow categories the Tenant Fees Act 2019 permits, and most upfront fees are banned outright. You cannot bill an RGI premium to the tenant as a separate charge. If you want the tenant to bear part of the cost, the safe route is to reflect it in the agreed rent rather than as an add-on fee.

How much arrears must build up before I can use a guarantor or claim on RGI?

There is no fixed trigger for chasing a guarantor, you can pursue them as soon as the tenant defaults, subject to the deed’s terms. RGI policies set their own trigger, often one or two months of arrears. Separately, the mandatory Section 8 arrears ground now requires at least three months’ (or 13 weeks’) arrears to be in place, so plan for a larger buffer than under the old rules.

Coming soon

Tenancy Pilot is launching soon. Our platform will bring document generators for compliant guarantor deeds, guided Section 8 notice building, rent collection with automatic arrears tracking, and compliance reminders into one place, so you spot a payment problem early and act on the correct, current forms. If you want protection that works alongside a guarantor or your RGI policy, join the waitlist and we will let you know the moment it goes live.

Disclaimer: This article is general information for England landlords and is not legal advice. The law changes and individual circumstances vary. Always check the current position on GOV.UK and legislation.gov.uk, use the current prescribed forms, and consult a qualified solicitor before acting on any matter affecting your legal rights or those of your tenants.