Whether you are a commercial landlord with a portfolio of dozens of properties or you are a newbie buy-to-let investor with just a single house or flat under your belt, it’s vital to understand landlord insurance and to get the best policy for your own personal circumstances. When you have tenants living in your property, there are all sorts of things that could go wrong. Without the right insurance, you could one day find yourself with a very nasty bill. With the right policy in place, however, renting out a property shouldn’t cause concern, as you will be able to rest easy in the knowledge that all eventualities have been covered. Let’s take a look at exactly what landlord insurance is and examine the various areas that make up this type of policy.
Why you need landlord insurance
First things first, landlord insurance may not be a legal requirement, but it is definitely something that you should always have in place. From fire and flood, to damage caused by negligent or malicious tenants, your property is at risk and therefore needs to be covered by buildings insurance. Additionally, your property may be let fully or partly furnished and your furniture could be damaged or even stolen by your tenants. That means that contents cover, even for a fairly limited sum, may be needed. Finally, you need to protect yourself from any claims that arise should a tenant or visitor be injured in any way, or even killed, whilst on your property. There are other elements to landlord insurance that can be added to a basic policy and these will be covered later in this article, but for now, these three areas highlight the need for a comprehensive policy.
Additionally, your mortgage provider may insist that you take out landlord insurance, even though this is not a legal obligation. Don’t forget that you absolutely must inform your mortgage company if you are thinking of letting out your property, and you must obtain written consent from them before you do so.
What landlord insurance actually covers
Landlord insurance can actually be broken down into a number of different components and you may find that you only need some elements in your personal circumstances. The three main areas of cover are buildings insurance, contents insurance and property owner’s liability insurance. There are a couple of extra add-ons that aren’t strictly necessary, and we’ll cover those in due course.
Buildings insurance is needed to cover the physical structure of your house - the bricks and mortar. As an example, if your property is destroyed or damaged by a fire or flood, you would claim on your buildings insurance to be able to rebuild it. Lesser damage, such as accidental damage to bathrooms and kitchens should also be covered within this part of the policy. If you need the policy to cover a garage or outbuilding, be sure to mention this to your insurance provider when seeking a quote.
In order to prepare an accurate quote for buildings insurance, your provider will need to know the rebuild value of your property. Rebuild costs will typically be lower than a regular house valuation because they do not take into account factors such as the proximity to good schools, transport links, the desirability of the neighbourhood and, most importantly, the value of the land, all of which contribute to a house valuation.
If you are renting out a leasehold property or a flat in a block, it may be the case that the leaseholder has already arranged buildings insurance and is charging you a proportional amount each year to cover your share of the insurance costs. Do check on this, as there is no need to purchase cover that is already being provided elsewhere.
On the face of it, contents insurance might seem unnecessary if you are renting out your property. After all, it will be the tenants’ contents that fill the home and not yours. However, if you have supplied white goods such as a fridge-freezer, washing machine and dishwasher, along with a TV and perhaps a hoover and beds, then you need to consider what would happen if any, or all, of these were damaged or stolen by your tenants. That’s why contents insurance may well prove a sensible addition to your landlord insurance policy.
The third key element of landlord insurance is called property owner’s liability insurance. This provides cover in the event that you are sued by a tenant or a visitor after an injury sustained on your property. Whilst such scenarios might seem far-fetched to the novice buy-to-let investor, they are in fact, all too common. From faulty boilers to collapsed ceilings caused by an overflowing bath, accidents and injuries do occur, so you need to ensure suitable coverage for every eventuality.
Additional items of cover that may be appropriate for you include loss of rent cover, legal expenses cover and emergency cover. Loss of rent cover pays out in the event that your tenants do not pay the rent for some reason and may be essential if you have mortgage payments to meet. Legal expenses cover is fairly self-explanatory and will cover any expenses incurred when handling a claim against you, as well as the costs involved in tenant disputes, including eviction costs. Emergency cover, which is perhaps at the belt-and-braces end of the policy remit, covers breakdown repair costs for such things as burst pipes, pest infestations and gas leaks.
Read the policy carefully
At nethouseprices, we are always keen to remind readers to check the small print of any policy or agreement they enter into and this is true of landlord insurance. All policies are slightly different and geared to the property being insured, so it’s vital to check for any exclusions and to make sure that you are happy with them. You should also check over the details of any excess amounts to which you are agreeing. These are the sums that you have to pay yourself, before being able to claim on your policy for the remainder. Excess limitations are likely to apply on both contents insurance and emergency cover insurance, so do check carefully.
At nethouseprices, we monitor the entire UK property market - both sales and rentals - to bring you up-to-date market insights, in-depth guides, and impartial commentary on house prices in the UK. Stay tuned for the UK’s best analysis, opinion and news for property owners and investors.
You can sign up to our newsletter and join Nethouseprice’s community of over 190,000 members who get regular property tips, relevant offers and news, click here http://nethouseprices.com/auth/user-register
Make a comment