Deposit alternatives
Is it actually insurance? What letting agents should ask about deposit alternatives in 2026
Rents are rising, tenancies are now periodic and the deposit was set on day one. Here is what letting agents should ask before offering a deposit alternative.
At a glance
Deposits are static: they are calculated when a tenancy begins, while rents and repair costs can continue to move.
Periodic tenancies change the picture: the old fixed-term renewal point is no longer there in the same way.
“Insured” can mean different things: agents need to understand exactly who carries the risk and how claims are funded.
Ask before you offer: product structure, tenant cost, protection start date and how cover stays current all matter.
A tenancy deposit is a fixed number.
It is calculated once, at the start, against a rent figure that was accurate on the day it was agreed.
Everything after that moves. The rent moves at renewal. Repair and labour costs move. The tenancy itself now moves in a way it did not a year ago.
That gap between a static number and a moving market is the reason deposit alternatives keep coming up in branch conversations. It is also the reason those conversations deserve better questions than they usually get.
The important question is not simply whether you offer a deposit alternative. It is whether you understand exactly what sits behind it.
Rents have moved. Deposits have not
Zoopla’s September report puts average UK rents for new lets 2.6% higher in the year to July 2026, up from a low of 1.6% in February, with the average UK rent now standing at £1,343 a month.
The direction of travel matters more than the figure. The number of homes available to rent has started falling, with 3% fewer homes for rent than a year ago, and Zoopla expects rental growth to reach between 4% and 5% by the end of 2026.
Deposits are capped at five weeks’ rent, or six where annual rent exceeds £50,000. Against the current average rent, five weeks comes to roughly £1,550 on a new let.
Now compare that to what is actually being held across the sector. The Tenancy Deposit Scheme’s most recent statistical briefing recorded 4.7 million protected deposits in England and Wales and an average deposit of £1,175. That average reflects tenancies agreed across several years, at rents that were set before the recent increases.
£1,343
average UK monthly rent for new lets cited in the article.
£1,550
roughly five weeks’ rent at that level.
£1,175
average protected deposit recorded in the cited TDS briefing.
None of this is a criticism of the deposit system. It is simply arithmetic. A deposit agreed two or three years ago was calculated against a lower rent, and it sits against repair costs that have not stayed still either.
Periodic tenancies changed the shape of the problem
Before May, a fixed term gave the sector a natural checkpoint. Renewal was the moment a deposit could be reviewed, topped up or left alone.
Since 1 May 2026, new tenancies in England begin as assured periodic tenancies and existing assured shorthold tenancies convert automatically, meaning tenancies have no fixed end date.
The checkpoint is gone. Propertymark’s guidance for agents is explicit that deposit levels should be reviewed carefully, must remain within the five-week cap, and that where deposits are not topped up when required, landlords may not have sufficient funds available at the end of the tenancy.
A longer tenancy can mean a bigger evidence challenge too.
As tenancies become more flexible and potentially longer, conditions at check-out come under greater scrutiny and it can become harder to evidence the difference between fair wear and tear and damage.
So the end of a tenancy in 2028 may involve a deposit set in 2026, against a rent that has since risen, with a longer period of occupation to evidence. That is the landscape every agent is now managing, whether or not a deposit alternative ever enters the conversation.
“Insured” does not always mean what landlords assume
Here is a distinction worth getting straight, because it causes genuine confusion and it is not the fault of anyone involved.
Deposit protection comes in two forms. In a custodial scheme, the scheme holds the money. In an insured scheme, the landlord or agent holds the money and pays a fee to the scheme.
TDS figures put the split at roughly 54% custodial and 46% insured.
The important distinction: “insured” in that context describes protection for the tenant’s money if the landlord fails to repay it. It does not mean the landlord is insured against a loss. If the eligible loss at the end of a tenancy is larger than the deposit being held, an insured scheme does not produce more money. The cap is still the cap.
That is worth saying plainly, because when a deposit alternative describes itself using insurance language, landlords and agents reasonably want to know which meaning is in play.
Five questions worth asking of any deposit alternative
If your agency is weighing up whether to offer one, these are the questions that separate products that can look very similar on a website.
1. Is this an insurance product, or a service that sits alongside one?
Some deposit alternatives are insurance contracts. Others are commercial agreements that provide a similar outcome by a different route. Both can be legitimate. They are not the same thing, and the difference shows up when a claim is paid.
2. When a valid claim is paid, whose money is it?
This is the practical version of the insurance question. Ask whether an insurer carries the risk, or whether the payment depends on recovery from the tenant.
3. What does the tenant pay, and is any of it refundable?
A tenant who feels the cost was unclear at the start becomes a problem for the branch, not the provider. Ask what is disclosed, when, and how prominently.
4. When does protection actually begin?
With joint tenancies this matters more than it sounds. If three sharers are named and two have completed the process, find out exactly where that leaves the landlord.
5. How does the protection stay current?
Given everything above about periodic tenancies and rising rents, ask whether the protected amount can be reviewed during a tenancy, or whether it is fixed at the point it was set.
What your branch is allowed to say
This part is often skipped, and it can cause more problems than the product choice itself.
Arranging or advising on general insurance is a regulated activity. A firm that is not directly authorised needs to act under a principal, and the FCA distinguishes between different roles.
An introducer appointed representative can introduce customers and distribute approved financial promotions, but cannot advise on, arrange or conclude the contract.
The practical version for your team?
Show the choice, keep it factual, and pass anything you are unsure about back to the provider.
Presenting a tenant with their options and giving them approved information is an introduction.
Telling them which option is better for their circumstances, or commenting on whether the price represents good value, moves towards advice. Keeping the distinction clear helps protect both compliance and the landlord relationship.
Where Skip the Deposit sits
Skip the Deposit has been built as an insurance product, and the answers to the five questions above are the reason the company says it is comfortable putting them in an article rather than burying them in a policy document.
It is insurance.
The insurer carries the risk, which means a valid claim does not depend on recovering the money from the tenant first.
Protection runs up to the standard deposit value.
The landlord is not being asked to accept less protection in exchange for the tenant paying less upfront.
The tenant pays a non-refundable fee.
Skip the Deposit says this is made clear at the point the tenant chooses, so the cost is understood upfront.
Protection can be reviewed annually.
The deposit amount can be reviewed annually and adjusted within reason where appropriate.
The cash deposit stays on the table.
The branch offers both options, the tenant decides, and the team does not need to recommend one over the other.
With periodic tenancies removing the old renewal checkpoint, the ability to review protection during the tenancy is a particularly important question for portfolio landlords.
The decision is yours to make
Deposit alternatives are not right for every agency or every landlord.
Plenty of branches will look at the questions above, decide the traditional deposit suits their portfolio, and be entirely correct.
What is harder to justify is offering one without knowing the answers. Your landlords are relying on your judgement when you put any option in front of them, and these are the questions they are likely to ask at the point a claim is made rather than the point it is offered.
For letting agents
Get the answers before you offer the alternative
If you would like the answers for Skip the Deposit in more detail, visit the FAQ page or register your agency at no cost and see how it works before offering it to anyone.
Read the FAQs Register your agency
Understand the structure, understand the protection, then decide whether it fits your portfolio.
Sources cited in the original article
Zoopla Rental Market Report, September 2026
TDS Statistical Briefing 2024/25, via NRLA
Propertymark, “Renters’ Rights Act: practical steps for letting agents to take now”
Propertymark, “What the Renters’ Rights Act means for deposit disputes”
FCA Handbook, SUP 12 and PERG 5.13, on appointed representatives
