Landlord

Do I need landlord Insurance?

Whether you’re renting out a second home as a holiday cottage or if you have a number of properties, any buy-to-let property represents a significant investment which you would be wise to protect. Although building insurance is compulsory whenever you take out a mortgage, it does not offer sufficient cover for those wishing to rent out their property. This is because the risks facing any potential landlord are very different to those facing your average homeowner.

Life Insurance

To give you an example: say the ground floor flat that you rent out is damaged by flood water. Your tenants are forced to move and start legal proceedings against you for the health problems they suffered from the flood. You now have the problem of the impending legal action and also you will not be receiving any income on your flat for the six months it will take to be repaired and you can get new tenants in. Whereas standard home insurance would only cover you for the damage to the flat and your possessions, Buy-to-Let or Landlord building insurance could also provide cover for the rent that you would lose out on while the flat is being repaired - plus cover your legal expenses against the law suit issued by your tenant.

Bad tenants

No homeowner would ever knowingly damage their own home. However for landlords it can be very different. Despite background checks and references, whenever a landlord rents out their property they are trusting that their tenants will look after it.

Unfortunately, tenants are not always who they appear to be and the result could be a flat stripped of everything from the copper piping to the light switches or finding that nice married couple have invited their sixteen closest relatives to come and stay with them for the duration of the tenancy.

Again, Landlord Insurance offers specific cover to protect you from such eventualities, including legal cover to evict unauthorised tenants and accidental damage.

How much cover?

If you are thinking about taking out landlord insurance, then it is very important that you consider the issue of Building Sum Insured (or BSI as it is known). Landlord building insurance is based up the cost of rebuilding your property should it be completely destroyed. Get it wrong and you could end up paying far too much for your insurance. When calculating the BSI of your property it is important to include things like the clearance of the site, surveyor fees as well as the actual cost of the rebuild.

There are a number of tools online that can help you calculate your rebuild cost, but it should also be stated on your mortgage statement. Of course if you're in any doubt the best thing to do is to get a professional survey done to ensure your BSI is as accurate as possible - this will, however, come at a cost. If you take out Landlord contents insurance you'll need to work out how much it would cost to replace all of your possessions in the property and get cover accordingly.

How are the premiums calculated?

As with any form of insurance, an insurer will assess the risk of your property and set your premiums according to the likelihood of you making a claim. Factors that will influence your premiums include:

  • The location of the property (property in a 'bad area' will mean higher premiums)
  • The Buildings Sum Insured (a low rebuild value means lower premiums)
  • The type of tenants in the property (it’s cheaper to insure 1 professional tenant than 7 students)
  • Whether you have a history of claims
  • The age of the property you are insuring
  • The type of property (flat, detached, terraced etc)

What kinds of properties can be covered?

The types of property that can be covered by Landlord insurance are: houses, bungalows, and a flat in a purpose-built block, and flats/bedsits in converted houses where you wish to insure the entire property and Holiday homes in the UK. It is also possible to insure multiple properties with just a single policy

What types of cover are available?

  • Landlord building insurance:
    Typically covers your building’s structure against things like fire, lightning, explosion, storm, earthquake, flood, subsidence, property owners liability, riot, escape of water, falling trees, theft, malicious damage, ground heave and land slip. Cover will start at around £75,000 to a maximum of £2 million.
  • Landlord contents insurance:
    Of course whether you need this depends on whether you are renting your property as furnished, part-furnished or unfurnished. Contents cover will also include carpets, curtains, fixtures and fittings – basically anything that can be damaged by fire, flood or theft – and is typically up to a maximum of £50,000. Remember to check that your policy ensures that your contents are replaced old for new. You can also get limited contents cover for just fixtures and fittings.
  • Liability insurance:
    As a Landlord you are responsible for the health & safety of your tenants. Liability cover will protect you against lawsuits for accidents, injuries or even fatalities at your property. The typical maximum for standard liability is £2 million.
  • Alternative accommodation insurance:
    Again this relates to your property becoming uninhabitable. If this were to happen then, as the name suggests, alternative accommodation insurance would cover the cost of your tenants living elsewhere while your property is being repaired.
  • Loss of rent insurance:
    This can provide cover in the event that your property becomes uninhabitable and as such you're unable to rent it out. Usually you would get 20% of building’s sum insured for 12 months but this will vary depending on the policy.
  • Accidental damage insurance:
    This covers you against accidental damage to your property caused by your tenants - some policies include this as standard, others include it as an add-on.
  • Emergency assistance cover:
    This usually covers the cost of calling out a contractor in the event of an emergency such as the breakdown of a boiler (although it doesn’t cover problems that are a result of lack of maintenance). Many providers will offer a 24 hour/365 days a year call out service to their clients. This may be an option worth investigating if you don’t live near your property or don’t use a property management company.
  • Rent guarantee cover:
    This will cover you if your tenant leaves the property owing you rent. Some also include £10,000 of legal cover and policies are available for either 6 or 12 months to suit your particular tenancy agreement. For some landlords this is a particularly attractive piece of cover as having a tenant default on rent payments could affect your ability to repay your mortgage.
  • Legal cover:
    This covers any legal costs arising from tenant disputes such as not paying rent, refusing to leave property or unauthorised inhabitants.

Contact us and we can discuss your specific requirements and help you to make an informed choice as to the type and level of cover you need.