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Buy-to-let landlords: How to protect rental income

Ludlowthompson.com said that although the warranty had been available for a number of years the cost of the warranty had become much cheaper over the last five years.

Stephen Ludlow, director, said: "Tenant rent defaults are still quite rare and the vast majority are cleared up within 60 days.

"Even so, buy-to-let landlords might want to protect themselves by buying what is still a relatively underused warranty. Its low cost won’t have much of an impact on your net income and it is tax deductible."

Ludlowthompson.com said the cost of the rental warranty it purchased for landlords had halved over the last five years as insurers became more comfortable with the risks of offering the cover.

However, the warranty is normally only available through letting agents, as insurers require that a proper credit check on the tenant has taken place.

Ludlowthompson.com said the typical policy:
• Cost as little as £300 per year;
• Covers tenant defaults of up to £10,000 of rent;
• Covers legal fees for evicting the tenant of up to £50,000;
• Is underwritten by a major insurer, such as Axa;
• Pays out for rents in arrears after a 60-day period. Ludlowthompson.com said most landlords would have protection for much of that period by holding a month’s rent as deposit.

Ludlowthompson.com said cover for the legal costs of evicting a tenant could also be bought as a stand-alone product for around £6.50 per month.

Stephen Ludlow said: "No matter how rigorous your credit and reference checking of a tenant is, there is always the small chance that if they are made redundant they won’t be able to pay the rent.

"Rental warranty offers an affordable way for buy-to-let landlords to cover themselves against that problem and despite the economic downturn the premiums are still very competitive."

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