Landlord Insurance Building & contents
It’s critical for a landlord to get the proper landlord insurance. Failure to get the correct landlord insurance could prove to be a very costly mistake, so it is imperative that a landlord fully understands what is, and isn’t, covered under the landlord insurance policy in case disaster strikes. This is brief guide to best landlords insurance to make sure you get the correct landlord insurance cover options for your investment property.
Do I need specialist landlord insurance?
Yes! A standard homeowner property insurance will not cover a rental property. The nature of having a tenant would make any cover void. A tenanted property requires cover from a specialist landlord insurance policy. A household policy offers no cover for buildings, contents or landlord’s (property owner’s) third party liabilities; while the rental property is being let out. Be particularly aware that when it come to insurance claims for water damage for a tenanted property responsibility is not always clear.
What does landlord insurance actually cover?
Most landlord insurance policies contain two elements. The bulk of the cost relates to the insuring of structure of the building, the rebuild cost.
Alongside this, a landlord insurance policy will typically cover fixtures and fittings, such as: carpets, flooring, kitchens, bathrooms, white goods, light fittings and curtains. This landlord insurance cover is perfectly adequate for those landlords letting out an unfurnished property, thought it is worth checking that the policy has some provision for cover against accidental breakage of sanitary fittings and fixed glass such as windows, as these are one of the most common areas of damage in a rental property.
One thing to be aware of with landlord insurance is that theft is only covered if there has been ‘forcible or violent entry or exit’. This therefore effectively excludes the situation where a tenant decides to make off with a landlord’s appliances and kitchen for example and underlines just how important having an adequate rental deposit is. The chances are a landlord insurance policy will not cover theft by a tenant.
It is possible for landlords to add specific contents to their rental property’s policy. Items of furniture, kitchen appliances, etc. However, once again the landlord insurance policy will only cover damage of these items and not theft by the tenant.
Calculating the buildings cover for landlord insurance.
The level of landlord insurance buildings cover will depend on a number of factors that relate to the rebuilding cost of your specific property. It is possible to carry out a pretty accurate estimation for a landlord insurance quote of this using the Building Cost Information Service (BCIS) which is part of the RICS. This calculator takes account of the area that the building to be insured is in, the type of property and its’ construction and will then generate a reinstatement value on which to base the level of landlord insurance you require.
Additional levels of landlord insurance cover
There are a number of other things that can be covered under a landlord insurance policy. The most common is rent guarantee insurance. This will insure a landlord against the loss of rental income should your tenant stop paying the rent. It works by having the tenants fully credit checked to ensure that they pose an acceptable insurance risk to the insurer. Once the tenant has passed this a landlord is cover against the legal costs of obtaining possession of their rental property and the loss of rent whilst this is going on.
There are other specific parts of a rental property that can be insured against failure namely boiler cover insurance which effectively insures a landlord against the cost of repairing or replacing their boiler. These policies are generally available through specialist utility insurance businesses rather than and insurance broker. These utility insurance companies like Homeserve will also offer additional insurance policies to cover drainage, plumbing and central heating.
Things to watch out for with landlord insurance:
There are a few things that the novice landlord should be aware of with landlord insurance:
- Don’t be tempted to under insure with your landlord insurance – if you do, it might save a few quid now but if disaster strikes it could leave you out of pocket by tens of thousands of pounds. My opinion is, the risk reward ratio just doesn’t add up!
- Check the level of your excess in the landlord insurance policy. This is the amount of the claim that you are required to pay on any claim and effectively controls the viability of any small claims. Increasing the level of excess on a landlord insurance will help make a landlord insurance policy cheaper, but too high an excess will effectively preclude a landlord from making a claim for small and often more numerous items. An excess of around £100 is normally ideal on a landlord insurance policy.
- Be aware that most landlord insurance policies will exclude theft by the tenant. This means that if a tenant disappears, stealing any items from a rental property, the landlord will not be covered by the landlord insurance policy. You should ensure that this aspect of any potential loss should be adequately covered by any rental deposit that has been taken.
- Most insurance companies will automatically index-link your landlord insurance policy to make sure that your reinstatement value is maintained in subsequent years. It is worth checking this when you take the landlord insurance policy out.
- If you a landlord with a leasehold property you should be aware of the recent court case impacting on the responsibility for landlord insurance for leaseholders.
Property Hawk recommends Alan Boswell’s Landlord Insurance, we’ve found them to be competitive on price as well as very comprehensive on cover. We have an established partnership with them that provides Property Hawk users access to a special discounted rate on landlord insurance.
So summing up, every landlord requires at the very least a specialist landlord building insurance for their rental property.
Next to a mortgage, landlord insurance is typically the next largest expense and therefore it’s worth shopping around to get the best landlord insurance deals, but my advice is don’t go cheap without understanding the different levels of cover between policies.
As a simple guide Defacqto give a 5 star rating to landlord insurance policies – with five stars being the best.