Kate Faulkner is one of the UK's leading property experts and in this article, she gives her opinion on landlord insurance.
As a landlord, you’ll be aware that insurance for buy to let properties is different to the insurance you have for your own home and you should already have an appropriate policy in place for the property you let. However, with providers regularly amending and improving their offerings, it might be worth reviewing your insurance if you haven’t done so in the last couple of years.
Firstly, it’s important to make sure the insurance for your rental property is properly tailored to your needs. That means protecting you and your property against the kinds of risks that come with any home and also the risks that are associated with letting your particular type of accommodation to tenants.
Most mainstream providers will cover most types of rental apart from HMOs (House in Multiple Occupation), which tend to require specialist cover as they are considered higher risk.
As ‘standard’, your landlord policy cover often includes:
•Buildings insurance (your mortgage lender will require this for rebuild purposes)
•Accidental damage cover
•Public liability insurance in case a tenant, contractor or visitor injures themselves in your property.
If your buy to let is a flat, you may or may not need buildings insurance, depending on the policy the freeholder has secured. You may only have to inform them that the flat is being let so that they can inform their provider or you may need additional cover.
Many specialist policies also include some of the following, but it’s important to check, as you might need to add them to your policy or take out separate cover for:
•Malicious damage and theft by your tenants or their guests
•Alternative accommodation, in case your tenants need to be re-homed for a short time after damage to the property
And it’s worth finding out if your insurance covers you for:
•Rent, in case your tenant defaults
•Contents, if letting part of fully furnished
•Glass & locks replacement
•Boiler repair or replacement
•Equipment breakdown, if your let includes white goods.
And if not, is it worth purchasing additional insurance?
Pros & cons of rent guarantee insurance
Landlords often ask whether it’s worth paying to guarantee their rental income, with the concern being that they pay more in premiums than they ever risk losing in rent. However, with insurers offering increasingly attractive and extensive policies, you may find it’s well worth taking one out in return for the peace of mind it offers.
Many policies now include rent cover for a year or more, pay out from the first month the tenant defaults and include legal cover in case you need to evict your tenant. However, policies do vary, so make sure you check these three key things first:
1.How long the insurance will pay out for – six months is common, some will pay up to 12 and some simply have a maximum total claim cap
2.The maximum monthly rental that can be claimed
3.When the policy will start to pay out - some will do so immediately, others require you to wait for 90 days.
In terms of cost, you should be able to get a 12-month policy for around £100 – sometimes less, if you belong to a landlord association.
Some other things to bear in mind:
If your property is in an area where flooding is an issue and your premium is elevated, as a result, do keep reviewing it, as insurance providers are competing for business all the time.
If you have several properties, it’s usually worth putting them all on one policy, known as portfolio insurance. That should reduce the cost per property and simplify your administration, as you only have one premium and one renewal date to remember.
And although there is no onus on you to do so, it’s good practice to remind your tenants, especially if it’s an unfurnished let, that it is their responsibility to insure their own contents.
Finally, when considering your policy and the cost of the premium, remember that if something goes wrong with your buy to let and you’re not adequately covered, it’s potentially more expensive for you than if you had a problem with your own home. Not only would you have the cost of repairing any damage and replacing furnishings and goods, but you may have to pay to rehouse your tenants and/or could lose a significant amount of rental income while still having to make mortgage payments. In short, cutting corners on insurance could result in your rental profits being wiped out for some considerable time.
The landlord insurance market is constantly innovating, so keep an eye on what’s new and when your policy comes up for renewal each year, take a little time to do some research and check that you’re paying the best rates for the right cover. And if you want to check your policy is right for you, speak to your Mortgage Advice Bureau advisor to check what they can secure for you.