If you are purchasing a property to let out you will be spending a considerable sum of money in order to do so. Whether that is with the assistance of a buy to let mortgage or entirely from your own resources, you will surely want to protect your investment by arranging suitable insurance.
Standard home insurance is not suitable so you will need to arrange a specialist form of cover known as Landlord Insurance. In this respect, we have put together this guide that we trust you find of benefit.
Why is normal home insurance not suitable?
Quite simply, a standard home insurance policy would not pay out should you make a claim for damage to the structure of the property or its contents caused by the likes of a fire, flood or theft as it is being used for your financial benefit i.e. to provide you with a rental income.
Also, the policy would not pay out if the property were left empty for more than 30 days unless the insurer were prepared to provide cover for an additional premium whereas, with a Landlord Insurance policy, cover may be available if the property were left unoccupied for 90/120 days.
Furthermore, a home insurance policy would not meet a claim for loss of rent due to the property being unoccupied as a result of it being so badly damaged perhaps due to a fire that it cannot be rented out until it is repaired.
What does Landlord Insurance cover provide?
The level of cover available may vary between insurance companies with some risks being included as standard and some being available as optional extras. Some of the things that may be covered include: –
Building including fixtures and fittings and/or contents – these would be covered against damage due to things like fire, flood, storm, explosion, riot, lightning as well as accidental damage caused by the tenants. They would also be covered in the event of theft. Please note that only the contents you own would be covered not the tenants as they would need to arrange their own insurance.
Public liability insurance – this would cover you financially in the event of one of your tenants being injured or killed whilst on the premises as you could be sued for a considerable sum of money.
Loss of rent – this would provide you with some financial support should the property be damaged and the tenants have to move out for a significant period of time.
Alternative accommodation – should the property be badly damaged and your tenants need to move out, the cost of providing them with temporary accommodation could be met for a period of time.
Legal assistance – this could prove financially beneficial should you need to involve solicitors in the event of say the need to claim back rent arrears.
Employer’s liability cover – should an employee suffer an injury perhaps whilst cleaning the rental property and sue you, this cover could prove financially beneficial in meeting the claim. It is also a legal requirement that you have such cover if you have one or more employees.
Home emergency cover – should the likes of a plumber be called out due to a burst pipe this option would go some way towards meeting the cost.
Malicious damage cover – this is sometimes included as part of the standard cover or it could be offered as an optional extra. This would provide cover should one of your tenants or their friends damage the building, fixtures and fittings or your contents on purpose.
Theft by tenant – if your tenant was to steal anything of yours in the property this option may pay out.
Unauthorised alterations – this would provide cover if the tenant was to make a change to the property such as removing a partition wall that you had not agreed to.
You may be responsible for meeting a certain amount of the claim that is known as an “excess”.
As you can see, there is a comprehensive level of cover available within a Landlord Insurance policy to provide you with complete peace of mind.
Who provides such cover?
You will be pleased to read that there are numerous insurance companies that provide Landlord Insurance ranging from some of the well-known national insurance companies to those that specialise in this type of cover.
How can you pay for Landlord Insurance?
There are a number of ways with the most popular being to pay by direct debit either on a monthly or annual basis. You may also be able to pay by standing order or even pay the annual premium by cheque.
Is Landlord Insurance a legal requirement?
Although it is not a legal requirement to insure the buildings and your contents in the property it would surely be a good idea to do so to protect your investment. After all, some tenants may not take as much care as you would in the property as they do not own it so accidental damage could occur perhaps due to the bath overflowing because someone did not turn the tap off and flooded the property.
If you are arranging a buy to let mortgage, the lender may make it a condition of the mortgage that the property is insured.
However, as mentioned earlier, do bear in mind that if you have one or more employees, that you are legally required to arrange employer’s liability insurance.
How is the amount of buildings cover calculated?
This is calculated based upon how much it would cost to rebuild the property not the price that you have paid for the property as the later would also include the value of the land that would still be their even if the building were burnt to the ground. A valuer/surveyor should be able to provide you with an estimate of the rebuilding costs.
How can you get a quote and arrange cover?
There are numerous ways. You may be able to arrange cover through the bank or building society with whom you are taking out a buy to let mortgage. You could call into the office of an insurance broker in your local high street and enquire if they can assist.
Another option is to go on the Internet and you will discover that there are many companies offering such cover, although this may take some time to obtain quotes from a number of different providers.
Article Courtesy of Alan Hope, Landlord Insure©LandlordZONE® – legal content applies primarily to England and is not a definitive statement of the law, always seek professional advice.