Landlord Insurance Cover Options
Most landlords know that they need specialist landlord insurance. Why? Because household policies do not cover buildings, contents or the landlord for third party liabilities while the buy-to-let property is being let out.
There are a number of options available to landlords when insuring their buy-to-let property.
Firstly, it is essential that a landlord gets their residential investment property insured. Otherwise should their buy-to-let property burn down, they then would be left only with a very expensive piece of land! The best way to find out how much a landlord should insure their buy-to-let property for, is to visit the Association of British Insurers (ABI) website. By registering they can then use their calculator to find out what the potential rebuild costs are and therefore the amount of insurance cover you the landlord needs.
What am I covered for?
When a landlord purchases building insurance, what does this actually insure them for? The simple answer is that a landlord needs to read the Summary of cover of each insurer as each policy varies. As a general rule however, a landlord insurance policy covers a landlord against damage to the building and permanent fixture such as baths, toilets, fitted kitchens and bedroom cupboards. Interior decorations are also covered, but a landlord should check whether floor coverings and domestic white goods are included as not all policies do.
One of the obvious differences between landlord insurance and domestic insurance is that landlords have tenants. As we know not all tenants are the same; some are perceived as more risky than others. This means that not all landlord insurance policies will cover students, tenants in receipt of benefits or asylum seekers.
One essential difference between landlord insurance & domestic insurance is that a landlord needs cover against potential huge claims made by a tenant or other party should an incident occur in their buy-to-let property. For instance imagine a tenant falling over cracking their head, because they say that the floor was uneven. Who are they going to sue? Off course, you the landlord; who could be presented with a potential claim that could amount to hundreds of thousands if not millions of pounds.
A landlord should also make sure that they are covered if their buy-to-let property is empty. Landlords all know that our rental properties may have to stand empty from time to time whilst you try and find a tenant. Voids can be painful enough without having the added worry of your residential investment property not being covered by the landlord insurance whilst it remains unoccupied.
One factor a landlord should consider is the size of any excess that the landlord insurance charges on a claim. Yes, the landlord insurance might be dirt cheap, but do you have to pay the first £500 of any claim? A £250 excess is probably around average. Remember though some insurers can offer different rates in return for an altered excess. All you the landlord need to do is ask. This is where a little bit of judgement comes in. If a landlord is letting to student tenants where there is the potential for you the landlord to have to make a number of small claims, then opting for a high excess is probably not the shrewdest move a landlord could make!
What’s not covered?
One aspect that a landlord is exposed to which can’t be covered by insurance is theft or damage by their tenants. If a landlord’s buy-to-let property is damaged as a result of forced entry, then the usual cover is available. However, if a landlord has their property damaged or items stolen without forced signs of entry then it is assumed that it has been carried out by the tenant and the landlord’s insurance policy will not cover them. I use as an example of this a situation where former tenants of mine disappeared back to the USA taking my kitchen and appliances with them. All of which I had to replace using my own funds. This is why it is so essential to get a tenant properly referenced and take a tenant deposit when letting your property.
Landlords should remember that once they have landlord insurance that they should keep their cover up to date, even if they stay with the same insurer. Every year building & therefore rebuilding costs rise meaning that you as the landlord should make sure that the sum insured rises to reflect this. To be honest most landlord insurance companies will do this automatically but it is always worth checking. In my view if you as the landlord are going to get insured you should be fully insured, otherwise if the worst happened and your investment property burnt down rather than being able to rebuild you buy-to-let property you may end up only being able to afford to put a Wendy House back in its place!
I’ve taken contents insurance out in the past. Now to be honest I don’t bother. This is because as I rent most of my properties part furnished the only contents as such are white goods, curtains and floor coverings. All these are covered automatically by my insurer Alan Bosewell in their building insurance. If you do rent out a property that is fully furnished then you will need contents insurance to make sure that things like furniture are covered. Some landlords and letting agents insist that their tenants have tenant insurance before they let their buy-to-let property to them. This means that should there be a break in resulting in subsequent damage to their buy-to-let property then the tenant can deal with it under their insurance. In reality this probably duplicates cover as the landlords building insurance should cover your buy-to-let property for these sorts of eventualities. What it does do though is put the onus on the tenant to sort out the claim. This means less work for you as the landlord and it also means that you then don’t have to “fork out” for the excess!